DEALING WITH UNIT ROOTS AND STRUCTURAL BREAKS

DEALING WITH UNIT ROOTS AND STRUCTURAL BREAKS       The theme unit roots in macroeconomics time series  have received a great amount...


DEALING WITH UNIT ROOTS AND STRUCTURAL BREAKS



     The theme unit roots in macroeconomics time series  have received a great amount of attention in term of theoretical and applied research over the last three decades. Since the seminar work of Nelson and Plosser(1982), testing for the presence of unit root in time series data has become a topic of great concern(Glynn,2006).

     Structural break tests helps to determine when and whether there is a change in a given data. Rob J Hyndman  posited that structural break might occur when there is war, or a major change in government policy,or some equally sudden event.



READ ALSO: A SIMPLE USE TO UNIT ROOT TEST AND ITS APPLICATION 



      Perron(2017), in his paper briefly outline different papers(both theoretical and applied),grouping them by themes(Structural Change Theory, Unit Root and Trend Break Theory and Structural Change - Empirical Studies). He provided contribution of various scholars on what have been done and /or offer new outlook. These papers deals with the problems related to unit root and structural break and the interaction between the two. 

          Charfeddine(2017) wrote that many researchers, when using long period of data,macroeconomics time series are generally subjected to structural breaks, and in that case, standard unit root tests will suffer from low power. However,Perron(1989) showed that failure to allow for an existing break leads to bias that reduces the ability to reject a false unit root null hypothesis.

NOTE


The link to the references below will be helpful only if you are interested in studying further the issues relating to unit roots and structural breaks and how to deal with them using Perron's 2017 paper.

REFERENCES


       Andrew,Donald W.K. 1993 . Tests for parameter instability and structural change with unknown change point. Econometrics 61: 821-856.

        Bai, Jushan. 1997. Estimating multiple structural breaks at one time. Econometric Theory 13: 315-52.

        Bai, Jushan and Pierre Parron. 1998. Estimating and Testing Linear Models with Structural Changes. Econometrica 66:47-78.

        Bai, Jushan and Pierre Parron. 2003.Computation and analysis of multiple structural change models. Journal of Applied Econometrica 18:1-22.

       Carrion-i- Silvertre,Joseph Lluis,Dukpa Kim, and Pierre Perron. 2009. GLS- Based Unit Root Tests with Multiple Structural Breaks Under Both the Null and the Alternative Hypotheses. Econometric theory 25: 1754-92. For related articles check here and here.

        Chang, Seong Yeon, and Pierre Perron. 2016. Inference on a Structural Break in Trend with Fractionally Integrated Errors. Journal of Time series Analysis 555-74.

       Hualde, Janvier. 2013. A Simple Test for the Equality of Integration Orders. Economics letter 119: 233-7. Related article here.
       

       J. Glynn, N. Perera, and R. Verna(2006).Unit Roots and Structural Breaks. A survey with application . Journal of Quantitative Method for Economics and Business Adminstration. 3: 63-79.

         Kejriwal,Mohitosh, and Pierre Perron. 2010. A Sequential Procedure to determine the number of Breaks in Trend with an Integrated or Stationary Noise Component. Journal of Time Series Analysis 31:305-28.

          Kiefer, Nicholas M, and Timothy J. Vogelsang. 2005. A New Asymptotic Theory for Heteroskedasticity - Autocorrelation Robust Tests. Econometric theory 21: 1130-64.

           Kim,Dukpa, and Pierre Perron. 2009. Unit Root Tests allowing for a Break in the Trend Fraction at an Unknown Time Under both the Null and Alternative Hypotheses. Journal of Econometrics 148: 1-13. Download article here.

         Labour Charfeddine.2017. The impact of energy consumption and economic development on ecological footprint and CO2 emissions: Evidence from a Markov switching equilibrium correction model. Journal of Energy economics.


           Ng, Serena, and Pierre Perron. 2001. Lag Length selection and the Construction of Unit Root with good Size and PowerEconometrica 68: 1519-54.


          Perron,Pierre. 1989. The Great crash, the oil price shock and the unit root hypothesis. Econometrica 57: 1361-401.

          Perron, Pierre. 1997 .Further evidence from breaking trend functions in macroeconomic variables .Journal of Econometrics 80: 355- 85.

         Perron, Pierre.2017. Unit root and structural breaksEconometrica 75:459-502.


           Perron, Pierre, and  Gabriel Rodriguez. 2003 . Gls detrending, efficient unit root tests and structural change. Journal of  Econometrics 115: 1-27.


         Perron,Pierre, and Tomoyoshi Yabu. 2009. Testing for  shifts in trend with an integrated or stationary noise component . Journal of Business & Economic Statistics 27:369-96.

         Perron Perron,Pierre, and Xiaokang Zhu. 2005. Structural Breaks with deterministic and stochastic trends. Journal of Econometrics 129: 65-119.

        Pesaran,M. Hashem. 2007. A simple panel unit root test in the presence of cross- section dependence .Journal of Applied Econometrics 22:265-312.


          Qu,Zhongjun and Pierre Perron. 2007. Estimating and testing structural changes in multivariate regression. Econometrica 75:459-502.

          Robinson, Peter M. 1994. Efficient tests of non stationary hypothesis. Journal of American statistical Association 89: 1420-37.

Ryan,K. F. and D.E.A. Giles.1998. Testing for unit roots in economics time series with missing observations. In T.B. Fomby and R.C. Hill(eds.) Advances in Econometrics. JAI press, Greenwich,CT,203-242.

          Tanaka, Katsuto.1999. The non stationary fractional unit rootEconometric Theory 15:549-82.

         Vogelsang, Timothy J., and Pierre Perron.1998. Additional tests for a unit root allowing the possibility of breaks in the trend function . International Economic Review 39: 1073-100.

         Zivot,Eric, and Donald W.K. Andrews. 1992. Further evidence on the great crash,the oil price shock and unit root hypothesisJournal of Business and Statistics 10: 251-70.

    

COMMENTS

Name

ARTICLES,26,Econometrics,19,economics update,45,MACROECONOMICS,9,MICROECONOMICS,2,
ltr
item
LIVE LOVE ECONOMICS: DEALING WITH UNIT ROOTS AND STRUCTURAL BREAKS
DEALING WITH UNIT ROOTS AND STRUCTURAL BREAKS
https://1.bp.blogspot.com/-3MCmIooyKsM/Wqb7WXC6_uI/AAAAAAAAAiQ/vKAfBrqw5zIbmNyt1VNm9CrSC5JV5QeVACLcBGAs/s320/pexels-photo-241544.jpeg
https://1.bp.blogspot.com/-3MCmIooyKsM/Wqb7WXC6_uI/AAAAAAAAAiQ/vKAfBrqw5zIbmNyt1VNm9CrSC5JV5QeVACLcBGAs/s72-c/pexels-photo-241544.jpeg
LIVE LOVE ECONOMICS
https://www.liveloveeconomics.com/2018/03/dealing-with-unit-roots-and-structural.html
https://www.liveloveeconomics.com/
https://www.liveloveeconomics.com/
https://www.liveloveeconomics.com/2018/03/dealing-with-unit-roots-and-structural.html
true
3384690550831276507
UTF-8
Loaded All Posts Not found any posts VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES POSTS View All RECOMMENDED FOR YOU LABEL ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy