Inference on a Structural Break in Trend with Fractionally Integrated Errors. (5th January 2016)

• Record Type: Journal Article
• Authors: Chang, Seong Yeon; Perron, Pierre
• Is Part Of: Journal of time series analysis. Volume 37:Number 4(2016:Jul.)
• Page Start: 555
• Page End: 574
• Publication Date: 2016-01-05
• Subjects: Fractionally integrated process -- linear trend -- segmented trend -- spurious break -- structural change.JEL. C13 -- C18 -- C22; Time-series analysis -- Periodicals; 519.232
• DOI: 10.1111/jtsa.12176
• Languages: English
• ISSNs: 0143-9782

Abstract

Abstract : Perron and Zhu (2005) established the consistency, convergence rate and limiting distributions of parameter estimates in time trends with a change in slope with or without a concurrent level change for the cases with I(1) or I(0) errors. We extend their analysis to the general case of fractionally integrated errors with memory parameter d ∗ . Our results uncover interesting features; e.g., with a level shift allowed, the convergence rate for the break date estimate is the same for all d ∗ ∈(−0.5, 0.5). In other cases, it is decreasing as d ∗ increases. We also provide results about the so‐called spurious break issue.