Inference on A Structural Break in Trend with fractionally Integrated Errors
Seong Yeon Chang, Pierre Perron
Journal of Time Series Analysis 2016, 37: 555–574.
#002346 20161018 (published)
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.
JEL-Codes: C13; C18; C22.
Keywords: Fractionally integrated process; linear trend; segmented trend; spurious break; structural change.

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