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Improving the length of confidence sets for the date of a break in level and trend when the order of integration is unknown

Harvey, David I.; Leybourne, Stephen J.

Improving the length of confidence sets for the date of a break in level and trend when the order of integration is unknown Thumbnail


Authors

DAVID HARVEY dave.harvey@nottingham.ac.uk
Professor of Econometrics



Abstract

Harvey and Leybourne (2015) construct confidence sets for the timing of a break in level and/or trend, based on inverting sequences of test statistics for a break at all possible dates. These are valid, in the sense of yielding correct asymptotic coverage, for I(0) or I(1) errors. In constructing the tests, location-dependent weights are chosen for values of the break magnitude parameter such that each test conveniently has the same limit null distribution. By not imposing such a scheme, we show that it is generally possible to significantly shorten the length of the confidence sets, whilst maintaining accurate coverage properties.

Journal Article Type Article
Acceptance Date Jun 11, 2016
Online Publication Date Jun 22, 2016
Deposit Date Jul 14, 2016
Publicly Available Date Jul 14, 2016
Journal Economics Letters
Print ISSN 0165-1765
Electronic ISSN 0165-1765
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 145
DOI https://doi.org/10.1016/j.econlet.2016.06.015
Keywords Level break; Trend break; Stationary; Unit root; Confidence sets
Public URL https://nottingham-repository.worktribe.com/output/793918
Publisher URL http://www.sciencedirect.com/science/article/pii/S0165176516302191

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