Bayesian tests for unit root and multiple breaks

Man-Suk Oh and Dong Wan Shin

Journal of Applied Statistics, 2010, vol. 37, issue 11, 1863-1874

Abstract: A Bayesian approach is considered for identifying sources of nonstationarity for models with a unit root and breaks. Different types of multiple breaks are allowed through crash models, changing growth models, and mixed models. All possible nonstationary models are represented by combinations of zero or nonzero parameters associated with time trends, dummy for breaks, or previous levels, for which Bayesian posterior probabilities are computed. Multiple tests based on Markov chain Monte Carlo procedures are implemented. The proposed method is applied to a real data set, the Korean GDP data set, showing a strong evidence for two breaks rather than the usual unit root or one break.

Keywords: multiple breaks; unit root test; Markov chain Monte Carlo (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1080/02664760903173450

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