DAVID HARVEY dave.harvey@nottingham.ac.uk
Professor of Econometrics
Unit Root Testing under a Local Break in Trend using Partial Information on the Break Date*
Harvey, David I.; Leybourne, Stephen J.; Robert Taylor, A.M.
Authors
STEVE LEYBOURNE steve.leybourne@nottingham.ac.uk
Professor of Econometrics
A.M. Robert Taylor
Abstract
We consider unit root testing allowing for a break in trend when partial information is available regarding the location of the break date. This takes the form of knowledge of a relatively narrow window of data within which the break takes place, should it occur at all. For such circumstances, we suggest employing a union of rejections strategy, which combines a unit root test that allows for a trend break somewhere within the window, with a unit root test that makes no allowance for a trend break. Asymptotic and _nite sample evidence shows that our suggested strategy works well, provided that, when a break does occur, the partial information is correct. An empirical application to UK interest rate data containing the 1973 ‘oil shock’ is also considered.
Journal Article Type | Article |
---|---|
Online Publication Date | Jan 7, 2013 |
Publication Date | 2014-02 |
Deposit Date | Apr 6, 2016 |
Publicly Available Date | Apr 6, 2016 |
Journal | Oxford Bulletin of Economics and Statistics |
Print ISSN | 0305-9049 |
Electronic ISSN | 1468-0084 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 76 |
Issue | 1 |
Pages | 93-111 |
DOI | https://doi.org/10.1111/obes.12013 |
Keywords | Unit root test; Breaks in trend; Minimum Dickey-Fuller test; Local GLS detrending; Union of rejections |
Public URL | https://nottingham-repository.worktribe.com/output/996980 |
Publisher URL | https://onlinelibrary.wiley.com/doi/abs/10.1111/obes.12013 |
Additional Information | This is the peer reviewed version of the following article: Harvey, D. I., Leybourne, S. J. and Robert Taylor, A.M. (2014), Unit Root Testing under a Local Break in Trend using Partial Information on the Break Date. Oxford Bulletin of Economics and Statistics, 76: 93–111, which has been published in final form at http://dx.doi.org/10.1111/obes.12013. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving. |
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