Unit root tests and dramatic shifts with infinite variance processes

Luis Martins

Journal of Applied Statistics, 2009, vol. 36, issue 5, 547-571

Abstract: A model which explains data that is subject to sudden structural changes of unspecified nature is presented. The structural shifts are generated by a random walk component whose innovations belong to the normal domain of attraction of a symmetric stable law. To test the model against the stationarity case, several non-parametric, and regression-based statistics are studied. The non-parametric tests are a generalization of the variance ratio test to innovations with heavy-tailed distributions. The tests are consistent and shown to have good finite sample size and power properties and are applied to a set of economic variables.

Keywords: unit root; stable processes; partial sums; limit distributions; empirical size and power (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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DOI: 10.1080/02664760802554321

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