Tests for Stationarity in Series with Endogenously Determined Structural Change

32 Pages Posted: 16 Dec 2004

See all articles by David I. Harvey

David I. Harvey

University of Nottingham - School of Economics

Terence C. Mills

Loughborough University - Department of Economics

Abstract

We consider tests of the null hypothesis of stationarity against a unit root alternative, when the series is subject to structural change at an unknown point in time. Three extant tests are reviewed which allow for an endogenously determined instantaneous structural break, and a related fourth procedure is introduced. We further propose tests which permit the structural change to be gradual rather than instantaneous, allowing the null hypothesis to be stationarity about a smooth transition in linear trend. The size and power properties of the tests are investigated, and the tests are applied to four economic time series.

Suggested Citation

Harvey, David I. and Mills, Terence C., Tests for Stationarity in Series with Endogenously Determined Structural Change. Available at SSRN: https://ssrn.com/abstract=625788

David I. Harvey (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Terence C. Mills

Loughborough University - Department of Economics ( email )

York House
Loughborough LE11 3TU
Great Britain
+44 1509 222703 (Phone)
+44 1509 223910 (Fax)

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