Browse > Article
http://dx.doi.org/10.5351/CKSS.2012.19.1.177

Robust Unit Root Tests with an Innovation Variance Break  

Oh, Yu-Jin (SKK GSB, Sungkyunkwan University)
Publication Information
Communications for Statistical Applications and Methods / v.19, no.1, 2012 , pp. 177-182 More about this Journal
Abstract
A structural break in the level as well as in the innovation variance has often been exhibited in economic time series. In this paper we propose robust unit root tests based on a sign-type test statistic when a time series has a shift in its level and the corresponding volatility. The proposed tests are robust to a wide class of partially stationary processes with heavy-tailed errors, and have an exact binomial null distribution. Our tests are not affected by the size or location of the break. We set the structural break under the null and the alternative hypotheses to relieve a possible vagueness in interpreting test results in empirical work. The null hypothesis implies a unit root process with level shifts and the alternative connotes a stationary process with level shifts. The Monte Carlo simulation shows that our tests have stable size than the OLSE based tests.
Keywords
Unit root tests; robust sign test; structural break; break in variance;
Citations & Related Records
연도 인용수 순위
  • Reference
1 Papell, D. H. and Prodan, R. (2003). The uncertain unit root in US real GDP: Evidence with restricted and unrestricted structural change, Journal of Money, Credit and Banking, 36, 423-427.   DOI   ScienceOn
2 Perron, P. (1990). Testing for a unit root in a time series with a changing mean, Journal of Business and Economic Statistics, 8, 153-162.   DOI
3 Perron, P. and Vogelsang, T. J. (1992). Nonstationarity and level shifts with an application to purchasing power parity, Journal of Business and Economic Statistics, 10, 301-320.   DOI
4 Amsler, C. and Lee, J. (1995). An LM test for a unit root in the presence of a structural change, Econometric Theory, 11, 359-368.   DOI   ScienceOn
5 Banerjee, A., Lumsdaine, R. L. and Stock, J. H. (1992). Recursive and sequential tests of the unit root and trend-break hypothesis: Theory and international evidence, Journal of Business and Economic Statistics, 10, 271-287.   DOI
6 Cavaliere, G. and Georgiev, I. (2007). Testing for unit roots in autoregressions with multiple level shifts, Econometric Theory, 23, 1162-1215.
7 Zivot, E. and Andrews, K. (1992). Further evidence on the great crash, the oil price shock, and the unit root hypothesis, Journal of Business and Economic Statistics, 10, 251-270.   DOI
8 Sen, A. (2009). Unit root tests in the presence of an innovation variance break that has power against the mean break stationary alternative, Statistics and Probability Letters, 79, 354-360.   DOI   ScienceOn
9 Shin, D. W., Park, S. J. and Oh, M. S. (2009). A robust sign test for panel unit roots under cross sectional dependence, Computational Statistics & Data Analysis, 53, 1312-1327.   DOI   ScienceOn
10 So, B. S. and Shin, D. W. (2001). An invariant sign test for random walks based on recursive median adjustment, Journal of Econometrics, 102, 197-229.   DOI   ScienceOn
11 Kapetanios, G. (2005). Unit root testing against the alternative hypothesis of up to m structural breaks, Journal of Time Series Analysis, 26, 37-49.   DOI   ScienceOn
12 Clemente, J., Montanes, A. and Reyes, M. (1998). Testing for a unit root in variables with a double change in the mean, Economics Letters, 59, 175-182.   DOI   ScienceOn
13 Hamori, S. and Tokihisa, A. (1997). Testing for a unit root in the presence of a variance shift, Economics Letters, 57, 245-253.   DOI   ScienceOn
14 Hsu, S. (1977). Tests for variance shift at an unknown time point, Journal of Applied Statistics, 26, 279-284.   DOI   ScienceOn
15 Kim, T. H., Leybourne, S. and Newbold, P. (2002). Unit root tests with a break in innovation variance, Journal of Econometrics, 109, 365-387.   DOI   ScienceOn
16 Lee, J. and Strazicich, M. C. (2003). Minimum LM unit root test with two structural breaks, Review of Economics and Statistics, 63, 1082-1089.
17 Lumsdaine, R. L. and Papell, D. H. (1997). Multiple trend breaks and the unit root hypothesis, Review of Economics and Statistics, 79, 212-218.   DOI   ScienceOn
18 Oh, Y. and So, B. S. (2004). Robust tests for unit roots in heterogeneous panels, Economics Letters, 84, 35-41.   DOI   ScienceOn
19 Oh, Y. and So, B. S. (2008). A new robust sign test for cointegration, Applied Economics Letters, 15, 971-974.   DOI   ScienceOn