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A Sequential Procedure to Determine the Number of Breaks in Trend with an Integrated or Stationary Noise Component

Author

Listed:
  • Mohitosh Kejriwal

    (Krannert School of Management, Purdue University)

  • Pierre Perron

    (Economics Department, Boston University)

Abstract

Perron and Yabu (2008) consider the problem of testing for a break occuring at an unknown date in the trend function of a univariate time series when the noise component can be either stationary or integrated. This paper extends their work by proposing a sequential test that allows one to test the null hypothesis of, say, l breaks, versus the alternative hypothesis of (l+1) breaks. The test enables consistent estimation of the number of breaks. In both stationary and integrated cases, it is shown that asymptotic critical values can be obtained from the relevant quantiles of the limit distribution of the test for a single break. Monte Carlo simulations suggest that the procedure works well in finite samples.

Suggested Citation

  • Mohitosh Kejriwal & Pierre Perron, 2009. "A Sequential Procedure to Determine the Number of Breaks in Trend with an Integrated or Stationary Noise Component," Boston University - Department of Economics - Working Papers Series wp2009-005, Boston University - Department of Economics.
    • Handle: RePEc:bos:wpaper:wp2009-005
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    References listed on IDEAS

    as
    1. Carrion-i-Silvestre, Josep Lluís & Kim, Dukpa & Perron, Pierre, 2009. "Gls-Based Unit Root Tests With Multiple Structural Breaks Under Both The Null And The Alternative Hypotheses," Econometric Theory, Cambridge University Press, vol. 25(6), pages 1754-1792, December.
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    7. Harvey, David I. & Leybourne, Stephen J. & Taylor, A.M. Robert, 2009. "Simple, Robust, And Powerful Tests Of The Breaking Trend Hypothesis," Econometric Theory, Cambridge University Press, vol. 25(4), pages 995-1029, August.
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    More about this item

    Keywords

    Structural Change; Sequential Procedure; Feasible GLS; Unit Root; Structural Breaks;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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