This research points to the serious problem of potentially misspecified alternative hypotheses when testing for unit roots in real exchange rates. We apply a popular unit root test against nonlinear ESTAR and develop a Markov Switching unit root test. The empirical power of these tests against...

This research points to the serious problem of potentially misspecified alternative hypotheses when testing for unit roots in real exchange rates. We apply a popular unit root test against nonlinear ESTAR and develop a Markov Switching unit root test. The empirical power of these tests against...

In this paper we analyze the convergence of interest rates in the European Monetary System (EMS) in a framework of changing persistence. This allows us to estimate the exact date of full convergence from the data. A change in persistence means that a time series switches from stationarity to...

In this paper we analyze the convergence of interest rates in the European MonetarySystem (EMS) in a framework of changing persistence. This allows us to estimate the exact date of full convergence from the data. A change in persistence means that a time series switches from stationarity to...

We study the empirical behaviour of semi-parametric log-periodogram estimation forlong memory models when the true process exhibits a change in persistence. Simulationresults confirm theoretical arguments which suggest that evidence for long memory islikely to be found...

We show that tests for a break in the persistence of a time series in the classical I(0) - I(1) framework have serious size distortions when the actual data generating process exhibits long-range dependencies. We prove that the limiting distribution of a CUSUM of squares based test depends on...

We consider the problem of forecasting time series with long memory when the memory parameter is subject to a structural break. By means of a large-scale Monte Carlo study we show that ignoring such a change in persistence leads to substantially reduced forecasting precision. The strength of...

A simple procedure for the specification of the transition function describing the regime switch in nonlinear autoregressive models is proposed. This procedure is based on auxiliary regressions of unit root tests and is applicable to a variety of transition functions. In contrast to other...

Linearity testing against smooth transition autoregressive (STAR) models when deterministic trends are potentially present in the data is considered in this paper. As opposed to recently reported results in Zhang (2012), we show that linearity tests against STAR models lead to useful results in...