Inference on a Structural Break in Trend with Fractionally Integrated Errors |
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Authors: | Seong Yeon Chang Pierre Perron |
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Affiliation: | 1. Wang Yanan Institute for Studies in Economics, MOE Key Laboratory of Econometrics, Fujian Key Laboratory of Statistical Science, Xiamen University, Xiamen, Fujian, China;2. Department of Economics, Boston University, Boston, MA, USA |
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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. |
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Keywords: | Fractionally integrated process linear trend segmented trend spurious break structural change JEL C13 C18 C22 |
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