Tests of stationarity against a change in persistence

Busetti, Fabio; Taylor, Robert

doi:10.1016/j.jeconom.2003.10.028

Cited by 195 publications

(209 citation statements)

References 24 publications

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“…Homm and Breitung (2012) compared various econometric approaches similar in nature to find that this SADF test has greater power than that of methods proposed in Bhargava (1986), the modified Kim (2000), and the modified Busetti-Taylor statistics (Busetti and Taylor, 2004). In addition, Homm and Breitung (2012) and PSY argue that the PWY procedure works reasonably well against recursive procedures for structural breaks and is significantly effective as a method to detect explosive behavior in real-time.…”

Section: Empirical Strategymentioning

confidence: 99%

Identifying Price Bubble Periods in the Energy Sector

Sharma

Escobari

2017

SSRN Journal

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In this paper we test for the existence of single and multiple episodes of explosive behavior in three energy sector indices (crude oil, heating oil, and natural gas) and five energy sector spot prices (West Texas Intermediate (WTI), Brent, heating oil, natural gas, and jet fuel). The results from the Supremum Augmented Dickey-Fuller (SADF) and the Generalized SADF tests provide strong statistical evidence of explosive behavior in all of our energy series. A simple theoretical framework of commodity pricing allows us to understand the assumptions to interpret explosive behavior as bubbles. By constructing implied convenience yields using futures prices we test the key assumption and we are able to identify the beginning and the end of bubble periods for the WTI, Brent, heating oil, and natural gas spot prices.

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Section: Empirical Strategymentioning

confidence: 99%

Identifying Price Bubble Periods in the Energy Sector

Sharma

Escobari

2017

SSRN Journal

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“…Kim (2000) and Busetti and Taylor (2004). If we wish to allow for d = 0 under the null, then d would have to be estimated first in order to apply such tests to differenced data.…”

Section: Assumption 1 For the True Break Fractions It Holds True Thatmentioning

confidence: 99%

Detecting Multiple Breaks in Long Memory: The Case of U.S. inflation

Hassler

Meller

2011

SSRN Journal

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Multiple structural change tests by Bei and Perron (1998) are applied to the regression by Demetrescu, Kuzin and Hassler (2008) Non-technical summaryOur paper contributes to the existing literature by introducing and applying a new test for determining the timing, number and significance of breaks in the persistence of time series. Here, persistence is modeled by the length of the time series' memory, measured by the degree of fractional integration. To the best of our knowledge, there exists no other method which allows to test for multiple unknown break points in the degree of fractional integration. One advantage of our method is its robustness against variations in volatility. Furthermore, the test may find breaks relatively close to the boarder of the observed sample. In a sample of 500 observations, for example, the test only needs 150 observations before or after the break in order to reliably determine the break if the difference in persistence is large enough.Knowledge about the (change of) persistence of economic time series is important in many policy and research areas. In the context of inflation, the degree of persistence provides information on the effectiveness of monetary policy. The better inflation expectations are anchored, the shorter the effect of a price shock will last less time a price shock will influence inflation and the lower inflation persistence will be. A break point test can thus, in retrospect, indicate if and how a change in monetary policy affects inflation persistence.In the literature, there is still disagreement about whether and when the U.S. inflation persistence has changed over the past five decades. Opposing empirical results can in part be attributed to differences in the measurement of inflation persistence. Based on the results of the test proposed in this paper, we come to the conclusion that there has been a break towards higher persistence in 1973. The break date roughly coincides with the collapse of the Bretton Woods system, the beginning of a period of high inflation and some oil price shocks. By contrast, the test does not confirm that a break took place in the 1980s as suggested by some previous studies. Nichttechnische Zusammenfassung

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“…The SADF test performs well when there is a single boom-bust episode in the time series. Simulation experiments in Homm and Breitung (2012) reveal that the SADF outperforms alternative methods, such as the modi…ed Bhargava (1986), the modi…ed Busetti and Taylor (2004), and the modi…ed Kim (2000) (with the corrections of Kim et al (2002)), in terms of power. These approaches are used to test a permanent change in persistence from a random walk to an explosive process.…”

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confidence: 96%

Episodes of Exuberance in Housing Markets: In Search of the Smoking Gun

Pavlidis

Yusupova

Paya

et al. 2015

J Real Estate Finan Econ

119

151

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After a prolonged period characterized by rapid real appreciation in house prices, there is now broad recognition of the severe correction in housing markets that followed as one of the causes of the 2008-09 global recession. We investigate the time series characteristics of three relevant price indicators of the housing market-real house prices, price-to-income, and price-to-rent ratios-for the U.S. and 21 other countries during the period 1975Q1-2013Q2 (see Mack and Martínez-García (2011)) for evidence of explosive behavior as a plausible explanation for the boom and bust. The empirical detection of explosive behavior in house prices provides a precise timeline as well as empirical content to the narrative connecting the evolution of housing markets to the global recession; our rich cross-country dataset o¤ers a novel international perspective. For testing and detection, we adopt a pair of novel techniques based on a right-tail variation of the standard Augmented Dickey-Fuller (ADF ) test-the supremum ADF (SADF ) ) and the generalized SADF (GSADF ) (Phillips et al. (2012) and Phillips et al. (2013))-where the alternative hypothesis is of a mildly explosive process (even periodically collapsing with the GSADF test) behavior within sample. Statistically signi…cant periods of exuberance are found in most countries, with our empirical estimates suggesting an unprecendented synchronization across countries preceeding the global recession. The boom in housing begins during the late 90s in the U.S. spreading to most countries by the early 2000s, until it bursts for most during 2007 08 as the impact on economic activity was being felt. In this regard, our …ndings corroborate the narrative of the 2008-09 global recession. In this paper, we also discuss more generally the use of these procedures to monitor international housing markets and as a warning signal.JEL Classi…cation: C22, G12, R30, R31

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Tests of stationarity against a change in persistence

Cited by 195 publications

References 24 publications

Identifying Price Bubble Periods in the Energy Sector

Identifying Price Bubble Periods in the Energy Sector

Detecting Multiple Breaks in Long Memory: The Case of U.S. inflation

Episodes of Exuberance in Housing Markets: In Search of the Smoking Gun

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