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Regression‐based Tests for a Change in Persistence *
Author(s) -
Leybourne Stephen J.,
Kim TaeHwan,
Robert Taylor A. M.
Publication year - 2006
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/j.1468-0084.2006.00179.x
Subject(s) - persistence (discontinuity) , econometrics , estimator , statistics , economics , unit root , series (stratigraphy) , regression , mathematics , stock (firearms) , statistical hypothesis testing , geography , geotechnical engineering , paleontology , engineering , biology , archaeology
We show that the minimal forward (reverse) recursive unit tests of Banerjee, Lumsdaine and Stock [ Journal of Business and Economics Statistics (1992) Vol. 10, pp. 271–288] are consistent against the alternative of a change in persistence from I (0) to I (1) [ I (1) to I (0)]. However, these statistics are also shown to diverge for series which are I (0) throughout. Consequently, a rejection by these tests does not necessarily imply a change in persistence. We propose a further test, based on the ratio of these statistics, which is consistent against changes either from I (0) to I (1), or vice versa, yet does not over‐reject against constant I (0) series. Consistent breakpoint estimators are proposed.