Although the t-ratio variant of the Dickey-Fuller test is the most commonly applied unit root test in practical applications, it has been known for some time that readily implementable, more powerful modifications are available. We explore the large sample properties of five of these modified...

Although the t-ratio variant of the Dickey-Fuller test is the most commonly applied unit-root test in practical applications, it has been known for some time that readily implementable, more powerful modifications are available. We explore the large-sample properties of five of these modified...

We show that the minimal forward (reverse) recursive unit tests of Banerjee, Lumsdaine and Stock [Journal of Business and Economics Statistics (1992) Vol. 10, pp. 271-288] are consistent against the alternative of a change in persistence from I(0) to I(1) [I(1) to I(0)]. However, these...

The Hodrick-Prescott filter is often applied to economic series as part of the study of business cycles. Its properties have most frequently been explored through the development of essentially asymptotic results which are practically relevant only some distance from series endpoints. Our...

Many structural models have attempted to explain the behaviour of exchange rates under the floating rate regime. Meese and Rogoff (1983) found that a random walk model performs at least as well as various structural and time series models for exchange rates in terms of out-of-sample forecast....

In this paper, we consider tests for a break in the level of a series at an unknown point in time. It is often the case that uncertainty exists concerning the order of integration of the series; consequently, we focus on tests that are applicable when the order of integration is not known. The...

We consider a simple random walk process, a special case ofthe Martingale model, which exhibits a deterministic break in its drift term,for instance, from positive to negative. This particular example can be aplausible model for a time series on exchange rates which displays a persistentcurrency...