Distinguishing between trend break models: Method and empirical evidence
Journal
Econometrics Journal
Journal Issue
4
Pages
171-190
Date Issued
2001
Author(s)
Abstract
We demonstrate that in time trend models, the likelihood-based tests of partial parameter stability have size distortions and cannot be applied to detect the changing pa-rameter. A two-step procedure is then proposed to distinguish between different trend-break models. This procedure involves consistent estimation of break dates and properly-sized tests for changing coefficient. In the empirical study of the NelsonPlosser data set, we find that the estimated change points and trend-break specifications resulting from the proposed procedure are quite different from those of Perron (1989, 1997), Chu and White (1992), and Zivot and Andrews (1992). In another application, our procedure provides formal support for the con-clusion of Ben-David and Papell (1995) that real per capita GDPs of most OECD countries exhibit a slope change in trend.
SDGs
Type
journal article