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Unit root testing under a local break in trend using partial information on the break date

Harvey, DI and Leybourne, SJ and Taylor, AMR (2014) 'Unit root testing under a local break in trend using partial information on the break date.' Oxford Bulletin of Economics and Statistics, 76 (1). 93 - 111. ISSN 0305-9049

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Abstract

We consider unit root testing allowing for a break in trend when partial information is available regarding the location of the break date. This takes the form of knowledge of a relatively narrow window of data within which the break takes place, should it occur at all. For such circumstances, we suggest employing a union of rejections strategy, which combines a unit root test that allows for a trend break somewhere within the window with a unit root test that makes no allowance for a trend break. Asymptotic and finite sample evidence shows that our suggested strategy works well, provided that, when a break does occur, the partial information is correct. An empirical application to UK interest rate data containing the 1973 'oil shock' is also considered. © 2013 The Department of Economics, University of Oxford and John Wiley & Sons Ltd.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Users 161 not found.
Date Deposited: 17 Nov 2014 13:02
Last Modified: 05 Feb 2019 18:16
URI: http://repository.essex.ac.uk/id/eprint/11241

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