A test for changing trends with monotonic power

Jilin Wu

Economics Letters, 2016, vol. 141, issue C, 15-19

Abstract: We propose a powerful test for changing trends in which no nuisance parameters are needed to be nonparametrically estimated, and the only inputs required are the regression residuals under the null hypothesis. The new test allows for serial dependence, conditional heteroskedasticity and time-varying unconditional variance in error terms. Monte Carlo experiments show the test has monotonic power against abrupt or smooth structural changes in trends.

Keywords: U-statistic; Deterministic trends; Structural changes; Monotonic power (search for similar items in EconPapers)
JEL-codes: C01 C14 G10 G14 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:141:y:2016:i:c:p:15-19

DOI: 10.1016/j.econlet.2016.01.006

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