Regression-based tests for a change in persistence

Stephen J. Leybourne, Tae Hwan Kim, A. M Robert Taylor

Research output: Contribution to journalReview article

3 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)595-621
Number of pages27
JournalOxford Bulletin of Economics and Statistics
Volume68
Issue number5
DOIs
Publication statusPublished - 2006 Oct 1

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All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Economics and Econometrics
  • Social Sciences (miscellaneous)

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