This paper studies issues related to the estimation of a structural change in the persistence of a univariate time series. The break is such that the process has a unit root [i.e., is I(1)] in the pre-break regime but reverts to a stationary [i.e., I(0)] process in the post-break regime or vice...

This paper proposes tests for a mean shift based on a new hybrid estimator of the long-run variance. It is shown that these tests can bypass the non-monotonic power problem of the LM tests while maintaining adequate size properties.

A novel procedure is applied to test for switches between hysteresis and the natural rate theory over more than a century of UK and USA unemployment data. For both the countries we see a period conforming to hysteresis starting in the early 1920s for the UK and 1930 for USA.

International wheat prices are tested for cointegration allowing for exponential smooth transition adjustment. The results suggest that owing to transactions costs, it is plausible that arbitrage will be greater, the further the prices deviate from each other.

Persistence in economic variables is common. We re-examine that using a time-varying parameter model. Results support a substantial reduction in persistence, particularly, when allowing for time-variation in the constant. This has important implications for policy-making and the effect of shocks.