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Nonparametric Unit Root Test and Structural Breaks

Author

Listed:
  • Belaire-Franch Jorge

    (Universitat de València)

  • Contreras Dulce

    (Universitat de València)

Abstract

It is a well known fact that stationarity and unit roots tests are seriously distorted, when the true data generating process is stationary around a broken trend. In this paper, the behaviour of Breitung's (J. Econom. (2002) 343-363) variance ratio test for unit roots is analyzed. It is shown that the test may be inconsistent against stationary alternatives with structural breaks. In addition, a new test procedure to account for structural breaks is proposed.

Suggested Citation

  • Belaire-Franch Jorge & Contreras Dulce, 2011. "Nonparametric Unit Root Test and Structural Breaks," Journal of Time Series Econometrics, De Gruyter, vol. 3(2), pages 1-14, April.
    • Handle: RePEc:bpj:jtsmet:v:3:y:2011:i:2:n:3
    DOI: 10.2202/1941-1928.1048
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    References listed on IDEAS

    as
    1. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    2. Daiki Maki, 2006. "Variance ratio tests for a unit root in the presence of a mean shift: small sample properties and an application to purchasing power parity," Applied Financial Economics, Taylor & Francis Journals, vol. 16(8), pages 607-615.
    3. Breitung, Jorg, 2002. "Nonparametric tests for unit roots and cointegration," Journal of Econometrics, Elsevier, vol. 108(2), pages 343-363, June.
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    Keywords

    Breitung’s test; structural breaks;

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