David I. Harvey
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.
Stephen J. Leybourne
A.M. Robert Taylor
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|
|Publication Date||Feb 1, 2014|
|Journal||Oxford Bulletin of Economics and Statistics|
|Peer Reviewed||Peer Reviewed|
|APA6 Citation||Harvey, D. I., Leybourne, S. J., & Robert Taylor, A. (2014). Unit root testing under a local break in trend using partial information on the break date*. Oxford Bulletin of Economics and Statistics, 76(1), doi:10.1111/obes.12013|
|Keywords||Unit root test; Breaks in trend; Minimum Dickey-Fuller test; Local GLS detrending; Union of rejections|
|Copyright Statement||Copyright information regarding this work can be found at the following address: http://eprints.nottingh.../end_user_agreement.pdf|
|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.
Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf
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