Confidence sets for the date of a break in level and trend when the order of integration is unknown
We propose methods for constructing confidence sets for the timing of a break in level and/or trend that have asymptotically correct coverage for both I(0) and I(1) processes. These are based on inverting a sequence of tests for the break location, evaluated across all possible break dates. We separ...
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| Format: | Article |
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Elsevier
2015
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| Online Access: | https://eprints.nottingham.ac.uk/32662/ |
| _version_ | 1848794461742563328 |
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| author | Harvey, David I. Leybourne, Stephen J. |
| author_facet | Harvey, David I. Leybourne, Stephen J. |
| author_sort | Harvey, David I. |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | We propose methods for constructing confidence sets for the timing of a break in level and/or trend that have asymptotically correct coverage for both I(0) and I(1) processes. These are based on inverting a sequence of tests for the break location, evaluated across all possible break dates. We separately derive locally best invariant tests for the I(0) and I(1) cases; under their respective assumptions, the resulting confidence sets provide correct asymptotic coverage regardless of the magnitude of the break. We suggest use of a pre-test procedure to select between the I(0)- and I(1)-based confidence sets, and Monte Carlo evidence demonstrates that our recommended procedure achieves good finite sample properties in terms of coverage and length across both I(0) and I(1) environments. An application using US macroeconomic data is provided which further evinces the value of these procedures. |
| first_indexed | 2025-11-14T19:16:34Z |
| format | Article |
| id | nottingham-32662 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:16:34Z |
| publishDate | 2015 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-326622020-05-04T20:10:03Z https://eprints.nottingham.ac.uk/32662/ Confidence sets for the date of a break in level and trend when the order of integration is unknown Harvey, David I. Leybourne, Stephen J. We propose methods for constructing confidence sets for the timing of a break in level and/or trend that have asymptotically correct coverage for both I(0) and I(1) processes. These are based on inverting a sequence of tests for the break location, evaluated across all possible break dates. We separately derive locally best invariant tests for the I(0) and I(1) cases; under their respective assumptions, the resulting confidence sets provide correct asymptotic coverage regardless of the magnitude of the break. We suggest use of a pre-test procedure to select between the I(0)- and I(1)-based confidence sets, and Monte Carlo evidence demonstrates that our recommended procedure achieves good finite sample properties in terms of coverage and length across both I(0) and I(1) environments. An application using US macroeconomic data is provided which further evinces the value of these procedures. Elsevier 2015-02 Article PeerReviewed Harvey, David I. and Leybourne, Stephen J. (2015) Confidence sets for the date of a break in level and trend when the order of integration is unknown. Journal of Econometrics, 184 (2). pp. 262-279. ISSN 0304-4076 Level break; Trend break; Stationary; Unit root; Locally best invariant test; Confidence sets http://www.sciencedirect.com/science/article/pii/S0304407614001894 doi:10.1016/j.jeconom.2014.09.004 doi:10.1016/j.jeconom.2014.09.004 |
| spellingShingle | Level break; Trend break; Stationary; Unit root; Locally best invariant test; Confidence sets Harvey, David I. Leybourne, Stephen J. Confidence sets for the date of a break in level and trend when the order of integration is unknown |
| title | Confidence sets for the date of a break in level and trend when the order of integration is unknown |
| title_full | Confidence sets for the date of a break in level and trend when the order of integration is unknown |
| title_fullStr | Confidence sets for the date of a break in level and trend when the order of integration is unknown |
| title_full_unstemmed | Confidence sets for the date of a break in level and trend when the order of integration is unknown |
| title_short | Confidence sets for the date of a break in level and trend when the order of integration is unknown |
| title_sort | confidence sets for the date of a break in level and trend when the order of integration is unknown |
| topic | Level break; Trend break; Stationary; Unit root; Locally best invariant test; Confidence sets |
| url | https://eprints.nottingham.ac.uk/32662/ https://eprints.nottingham.ac.uk/32662/ https://eprints.nottingham.ac.uk/32662/ |