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Test Procedures for Unit Roots in Time Series with Level Shifts at Unknown Time*
Author(s) -
Lanne Markku,
Lütkepohl Helmut,
Saikkonen Pentti
Publication year - 2003
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/1468-0084.00036
Subject(s) - estimator , unit root , series (stratigraphy) , monte carlo method , mathematics , structural break , set (abstract data type) , statistics , econometrics , statistical hypothesis testing , computer science , paleontology , programming language , biology
Two types of unit root tests which accommodate a structural level shift at a known point in time are extended to the situation where the break date is unknown. It is shown that for any estimator for the break date the tests have the same asymptotic distribution as the corresponding tests under the known break date assumption. Different estimators of the break date are compared in a Monte Carlo experiment and a recommendation for choosing the break date in small samples is given. Example series from the Nelson–Plosser data set are used to illustrate the performance of our tests.