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On the use of Sub‐sample Unit Root Tests to Detect Changes in Persistence

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  • A. M. Robert Taylor

Abstract

. We investigate the behaviour of rolling and recursive augmented Dickey–Fuller (ADF) tests against processes which display changes in persistence. We show that the power of the tests depend crucially on the window width and warm up parameter for the rolling and recursive procedures respectively, on whether forward or reverse recursive sequences of tests are computed, and on the persistence change process generating the data. To ameliorate these dependencies we extend the available critical values for these tests, and propose a number of new sub‐sample unit root tests for which finite sample and asymptotic critical values are also provided. An empirical illustration on OECD real output data is also provided.

Suggested Citation

  • A. M. Robert Taylor, 2005. "On the use of Sub‐sample Unit Root Tests to Detect Changes in Persistence," Journal of Time Series Analysis, Wiley Blackwell, vol. 26(5), pages 759-778, September.
    • Handle: RePEc:bla:jtsera:v:26:y:2005:i:5:p:759-778
    DOI: 10.1111/j.1467-9892.2005.00442.x
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    References listed on IDEAS

    as
    1. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
    2. Stephen Leybourne & Tae-Hwan Kim & Vanessa Smith & Paul Newbold, 2003. "Tests for a change in persistence against the null of difference-stationarity," Econometrics Journal, Royal Economic Society, vol. 6(2), pages 291-311, December.
    3. Busetti, Fabio & Taylor, A. M. Robert, 2004. "Tests of stationarity against a change in persistence," Journal of Econometrics, Elsevier, vol. 123(1), pages 33-66, November.
    4. Kim, Jae-Young, 2000. "Detection of change in persistence of a linear time series," Journal of Econometrics, Elsevier, vol. 95(1), pages 97-116, March.
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    Cited by:

    1. Taipalus, Katja, 2012. "Signaling asset price bubbles with time-series methods," Bank of Finland Research Discussion Papers 7/2012, Bank of Finland.
    2. repec:zbw:bofism:2006_035 is not listed on IDEAS
    3. Taipalus, Katja, 2012. "Detecting asset price bubbles with time-series methods," Scientific Monographs, Bank of Finland, number 2012_047.
    4. repec:zbw:bofism:2012_047 is not listed on IDEAS
    5. Cerqueti, Roy & Costantini, Mauro & Gutierrez, Luciano, 2007. "Change in persistence tests for panels," Economics & Statistics Discussion Papers esdp07040, University of Molise, Department of Economics.
    6. Cerqueti, Roy & Costantini, Mauro & Gutierrez, Luciano, 2008. "Change in persistence tests for panels: An update and some new results," Economics & Statistics Discussion Papers esdp08043, University of Molise, Department of Economics.
    7. Taipalus, Katja, 2012. "Signaling asset price bubbles with time-series methods," Research Discussion Papers 7/2012, Bank of Finland.
    8. repec:zbw:bofrdp:2012_007 is not listed on IDEAS
    9. Costantini, Mauro & Gutierrez, Luciano, 2007. "Simple panel unit root tests to detect changes in persistence," Economics Letters, Elsevier, vol. 96(3), pages 363-368, September.
    10. Taipalus, Katja, 2006. "Bubbles in the Finnish and US equities markets," Scientific Monographs, Bank of Finland, number 35/2006.

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