This paper examines the asymptotic and finite sample behaviour of the ADF and Phillips–Perron statistics under the presence of a break in the trend function. We prove that the break magnitude affects ...these two statistics in a similar way, drawing them closer the acceptance zone, the higher the break magnitude. By contrast, the influence of the lag truncation parameter does not have a similar effect on them, being very important for the ADF whilst negligible for the Phillips–Perron statistics.
This paper investigates the time series estimation of Cox, Ingersoll, and Ross's square-root, mean-reverting specification for interest rate dynamics. For a priori reasonable mean reversion, the ...stochastic behavior of interest rates is sufficiently close to a non-stationary process with a unit root so that least squares, the generalized method of moments, as well as maximum likelihood estimation provide upward biased estimates of the model's speed of adjustment coefficient. Corresponding bond yields, as a result, exhibit excessive mean reversion. In addition, estimates of the specification's long-term mean interest rate are seen to display erratic behavior when near a unit root. These conclusions are robust to assuming multiple state variable specifications, such as Brennan and Schwartz's two-factor model of interest rate dynamics. We also document conditions under which this unit root problem can be alleviated when the cross-sectional restrictions of the Cox, Ingersoll, and Ross single factor term structure model are imposed.
New panel unit root tests of PPP Coakley, Jerry; Fuertes, Ana Marı́a
Economics letters,
11/1997, Letnik:
57, Številka:
1
Journal Article
Recenzirano
We use the new panel unit root tests Im, K.S., Pesaran, M.H., Shin, Y., 1995. Testing for unit roots in heterogenous panels. WP 9526, DAE, University of Cambridge. Revised March 1997 to analyse the ...stationarity of real exchange rates for the G10 economies and Switzerland. Our results for monthly data 1973–96 indicate mean reversion in real exchange rates and a half life of under three years for one-off shocks.
. This paper describes artificial neural network based pure significance tests for the unit root hypothesis against nonlinear alternatives. The theoretical properties of the tests are discussed and a ...Monte Carlo investigation of their small sample properties is undertaken.
Weak exogeneity in I(2) VAR systems Paruolo, Paolo; Rahbek, Anders
Journal of econometrics,
12/1999, Letnik:
93, Številka:
2
Journal Article
Recenzirano
This paper defines parametric conditions under which a subset of variables is weakly exogenous with respect to the (multi)-cointegration parameters in I(2) VAR
systems. The weak exogeneity conditions ...can be interpreted in terms of common trends, corresponding to the cumulation of the errors from the marginal equations into the I(2) trends, or in terms of ‘no levels and difference feedback’ into the marginal model equations. A modified version of the two-stage procedure proposed in Johansen (1995) is adopted for conditional statistical inference. Corresponding tests for the above restrictions are derived and discussed. Asymptotic properties of the tests and of the conditional estimators are analyzed. It is shown that if the conditions of weak exogeneity do not apply, the conditional estimators of the long-run parameters can be inconsistent and/or present limit distributions with nuisance parameters, according to which part of the conditions fails to hold. A test for weak exogeneity restrictions as a routine check before any analysis of conditional models is strongly recommended.
In this work, we derive exact and approximate expressions for the conditional mean and variance of the initial state of a state space model, allowing for unit roots and stochastic inputs. These ...results provide adequate initial conditions to compute the exact likelihood using the Kalman filter. The exact conditional moments are the best choice when the stochastic structure of the inputs is known. If this is not the case, the approximate expressions are a good alternative, as some simulation results illustrate.
The unemployment structure of the US states Clemente, Jesús; Lanaspa, Luis; Montañés, Antonio
The Quarterly review of economics and finance,
09/2005, Letnik:
45, Številka:
4
Journal Article
Recenzirano
Odprti dostop
This paper analyses the time series properties of the unemployment rates of the US economy using a regional disaggregated level. Our results are, in general, favorable to the rejection of the ...presence of a unit root in these variables. However, we can also observe that this conclusion is clearly qualified by the level of disaggregation employed. We also find robust evidence in favor of the presence of some breaks in the evolution of these unemployment rates. We subsequently offer an estimation of the NAIRU, which is based on the use of the Bai–Perron procedure.
In this paper we consider the problem of testing for a variance change in nonstationary and nonparametric time series models. The models under consideration are the unstable AR(q) model and the fixed ...design nonparametric regression model with a strong mixing error process. In order to perform a test, we employ the cusum of squares test introduced by Inclan and Tiao (1994, J. Amer. Statist. Assoc.,89,913-923). It is shown that the limiting distribution of the test statistic is the sup of a standard Brownian bridge as seen in iid random samples. Simulation results are provided for illustration. PUBLICATION ABSTRACT
The classification between stochastic trend stationarity and deterministic broken trend stationarity is important because incorrect inferences can follow if a stationary series with a broken trend is ...incorrectly classified as integrated. In this paper, we consider joint tests for regular and seasonal unit roots null hypothesis against broken trend stationarity alternatives where the location of the break is known or unknown. Based on the F-test proposed by Hasza and Fuller (1982, Ann. Statist. 10, 1209–1216), we develop testing procedures for distinguishing these two types of process. The asymptotic distributions of test statistics are derived as functions of Wiener processes. A response surface regression analysis directed to relating the finite sample distributions and the breaking position is studied. Simulation experiments suggest that the power of the test is reasonable. The testing procedure is illustrated by the Canadian consumer price index series.
This paper builds on the existing literature on tests of the null hypothesis of deterministic seasonality in a univariate time‐series process. Under the assumption of independent Gaussian errors, we ...derive the class of locally weighted mean most powerful invariant tests against unit roots at the zero and/or seasonal frequencies in a seasonally observed process. Representations for the limiting distributions of the proposed test statistics under sequences of local alternatives are derived, and the relationship with tests for corresponding moving average unit roots is explored. We also propose nonparametric modifications of these test statistics designed to have limit distributions which are free of nuisance parameters under weaker conditions on the errors. Our tests are shown to contain existing stationarity tests as special cases and to extend these tests in a number of useful directions.
PDF
