Paper #956

Títol:

Is the observed persistence spurious? A test for fractional integration versus short memory and structural breaks

Autor:

Laura Mayoral

Data:

Octubre 2005

Resum:

Although it is commonly accepted that most macroeconomic variables are nonstationary, it is often difficult to identify the source of the non-stationarity. In particular, it is well-known that integrated and short memory models containing trending components that may display sudden changes in their parameters share some statistical properties that make their identification a hard task. The goal of this paper is to extend the classical testing framework for I(1) versus I(0)+ breaks by considering a a more general class of models under the null hypothesis: non-stationary fractionally integrated (FI) processes. A similar identification problem holds in this broader setting which is shown to be a relevant issue from both a statistical and an economic perspective. The proposed test is developed in the time domain and is very simple to compute. The asymptotic properties of the new technique are derived and it is shown by simulation that it is very well-behaved in finite samples. To illustrate the usefulness of the proposed technique, an application using inflation data is also provided.

Paraules clau:

Fractional integration, structural breaks, unit roots, trends

Codis JEL:

C12, C22

Àrea de Recerca:

Gestió de la Producció i de les Operacions

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