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Size and power of two recent unit root tests that allow for structural breaks

Nordström, Marcus LU (2017) NEKN01 20171
Department of Economics
Abstract
This paper examines the properties of the two recent structural break unit root tests developed in Harvey, Leybourne and Taylor (2013) and Narayan and Popp (2010). The properties are investigated by Monte Carlo simulations in an environment where two trend breaks of small to large magnitudes are present. We find that the Harvey, Leybourne and Taylor (2013) test has superior size and power properties compared to the Narayan and Popp (2010) test. In addition, we investigate the accuracy of the break detection of the two procedures. The results show that the former test is more accurate than the later test except for when the breaks are very large and the null is true.
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author
Nordström, Marcus LU
supervisor
organization
course
NEKN01 20171
year
type
H1 - Master's Degree (One Year)
subject
keywords
Unit root test, Structural breaks, Multiple trend breaks, Endogenous breaks, Monte Carlo simulations
language
English
id
8911827
date added to LUP
2017-07-10 13:53:10
date last changed
2017-07-10 13:53:10
@misc{8911827,
  abstract     = {This paper examines the properties of the two recent structural break unit root tests developed in Harvey, Leybourne and Taylor (2013) and Narayan and Popp (2010). The properties are investigated by Monte Carlo simulations in an environment where two trend breaks of small to large magnitudes are present. We find that the Harvey, Leybourne and Taylor (2013) test has superior size and power properties compared to the Narayan and Popp (2010) test. In addition, we investigate the accuracy of the break detection of the two procedures. The results show that the former test is more accurate than the later test except for when the breaks are very large and the null is true.},
  author       = {Nordström, Marcus},
  keyword      = {Unit root test,Structural breaks,Multiple trend breaks,Endogenous breaks,Monte Carlo simulations},
  language     = {eng},
  note         = {Student Paper},
  title        = {Size and power of two recent unit root tests that allow for structural breaks},
  year         = {2017},
}