Potential Pitfalls in Determining Multiple Structural Changes With an Application to Purchasing Power Parity
Bibliographic Data
| ID | 19417357 |
|---|---|
| Authors | Ruxandra Prodan (University of Houston, corresponding author) |
| Year | 2008 |
| Volume | 26 |
| Issue | 1 |
| Pages | 50-65 |
| Publication date | 2008-01-01 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Business and Economic Statistics (JOURNAL) |
| Journal identifiers | ISSN: 0735-0015 • E-ISSN: 1537-2707 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1198/073500107000000304 |
| OpenAlex | W1988713777 |
| Language | EN |
| Citations received | 8 |
| References cited | 37 |
We investigate the empirical performance of the Bai and Perron multiple structural change tests and show that the use of their critical values may cause severe size distortions in persistent series. To correct these size distortions while maintaining a good power, we implement the Bai structural change test and extend it in two directions, developing a new procedure to choose the number of breaks and a restricted version that specifically models breaks that imply mean or trend reversion. Using our new methodologies, we reconcile the results of unit root tests with those of tests for structural change when testing for long-run purchasing power parity
Cointegration · Econometrics · Economics · Macroeconomics · Mean reversion · Purchasing power parity · Statistics · Structural break · Structural change · Unit root · Unit root test · Computer Science · Financial Risk and Volatility Modeling · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact
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| Citations per year | 0.33 |
|---|---|
| Citation span | 2002 - 2026 (25) |
| Highly cited | No |