A stationarity test in the presence of an unknown number of smooth breaks

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Macroeconomic variables have been shown to display a wide variety of structural breaks of unknown number, duration and form. This poses a challenge since improperly modelled breaks can result in a seriously misspecified model. In this paper, we develop a new test for stationarity that approximates the unknown form of structural breaks using a selected frequency component from a Fourier approximation. Our proposed test performs quite well when breaks are gradual, and shows reasonable power. The appropriate use of the test is illustrated by examining real exchange rates in the postBretton Woods period. © 2006 Blackwell Publishing Ltd.

Bibliographical metadata

Original languageEnglish
Pages (from-to)381-409
Number of pages28
JournalJournal of Time Series Analysis
Issue number3
Publication statusPublished - May 2006