TY - JOUR
T1 - Finite sample behaviour of the level shift model using quasi-differenced data
AU - Rodríguez, Gabriel
PY - 2007/1
Y1 - 2007/1
N2 - When using quasi-differenced data in a model where a break in the intercept is allowed, asymptotic distributions of the M, ADF, and PT statistics are the same as those in the model where only an intercept and a time trend are included. However, the finite sample behaviour for common sample sizes used in empirical applications is very different. Finite-sample critical values are calculated using two different methods to select the break point and the lag length. Comparison with asymptotic and finite-sample distributions of a model, where only a constant and a time trend are included in the set of deterministic components, shows strong differences. In particular, these differences are more clear for the M and PT statistics, whereas the ADF statistics is not affected too much. An empirical application is performed to show the pitfalls of using asymptotic or finite-sample critical values for a model where a break in the intercept has not been taken into account.
AB - When using quasi-differenced data in a model where a break in the intercept is allowed, asymptotic distributions of the M, ADF, and PT statistics are the same as those in the model where only an intercept and a time trend are included. However, the finite sample behaviour for common sample sizes used in empirical applications is very different. Finite-sample critical values are calculated using two different methods to select the break point and the lag length. Comparison with asymptotic and finite-sample distributions of a model, where only a constant and a time trend are included in the set of deterministic components, shows strong differences. In particular, these differences are more clear for the M and PT statistics, whereas the ADF statistics is not affected too much. An empirical application is performed to show the pitfalls of using asymptotic or finite-sample critical values for a model where a break in the intercept has not been taken into account.
KW - GLS detrending
KW - Information criteria
KW - Structural change
KW - Truncation lag
KW - Unit root test
UR - http://www.scopus.com/inward/record.url?scp=34648825660&partnerID=8YFLogxK
U2 - 10.1080/10629360600817397
DO - 10.1080/10629360600817397
M3 - Article
AN - SCOPUS:34648825660
SN - 0094-9655
VL - 77
SP - 889
EP - 905
JO - Journal of Statistical Computation and Simulation
JF - Journal of Statistical Computation and Simulation
IS - 10
ER -