Detection of Structural Change in the Long-run Persistence in a Univariate Time Series

In this paper, we investigate a test for structural change in the long-run persistence in a univariate time series. Our model has a unit root with no structural change under the null hypothesis, while under the alternative it changes from a unit-root process to a stationary one or vice versa. We propose a Lagrange multiplier-type test, a test with the quasi-differencing method, and 'demeaned versions' of these tests. We find that the demeaned versions of these tests have better finite-sample properties, although they are not necessarily superior in asymptotics to the other tests. Copyright 2005 Blackwell Publishing Ltd.