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2006-17 Testing for structural breaks and other forms of non-stationarity

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posted on 2023-08-05, 07:46 authored by Maria S. Heracleous, Andreas Koutris, Aris Spanos

In the 1980s and 1990s the issue of non-stationarity in economic time series has been discussed in the context of unit roots vs. mean trends in AR(p) models. More recently this perspective has been extended to include structural breaks. In this paper we take a much broader perspective by viewing the problem of changing parameters as one of misspecification testing due to the nonstationarity of the underlying process. The proposed misspecification testing procedure relies on resampling techniques to enhance the informational content of the observed data in an attempt to capture heterogeneity ‘locally’ using rolling window estimators of the primary moments of the stochastic process. The effectiveness of the testing procedure is assessed using extensive Monte Carlo simulations.

History

Publisher

Department of Economics, American University

Language

English

Notes

Working Paper No. 2006-17. 26 pages.

Handle

http://hdl.handle.net/1961/4984

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