Explosive behaviour and long memory with an application to European bond yield spreads
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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in: Scottish Journal of Political Economy, Jahrgang 66, Nr. 1, 01.02.2019, S. 139-153.
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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TY - JOUR
T1 - Explosive behaviour and long memory with an application to European bond yield spreads
AU - Wegener, Christoph
AU - Kruse, Robinson
PY - 2019/2/1
Y1 - 2019/2/1
N2 - This article deals with the interplay of explosive behaviour and long memory. We conduct Monte Carlo simulations and study the finite‐sample properties of the popular unit root test by Phillips et al. (2011) against explosive alternatives. This test exhibits severe upward size distortions under the presence of strongly autocorrelated residuals. We propose the usage of a set of adjusted critical values which leads to a size‐controlled test with increased power. As a complement, we consider the Lagrange Multiplier test against long memory by Tanaka (1999). We study European government bond yield spreads during the financial crisis.
AB - This article deals with the interplay of explosive behaviour and long memory. We conduct Monte Carlo simulations and study the finite‐sample properties of the popular unit root test by Phillips et al. (2011) against explosive alternatives. This test exhibits severe upward size distortions under the presence of strongly autocorrelated residuals. We propose the usage of a set of adjusted critical values which leads to a size‐controlled test with increased power. As a complement, we consider the Lagrange Multiplier test against long memory by Tanaka (1999). We study European government bond yield spreads during the financial crisis.
KW - Economics
UR - http://www.scopus.com/inward/record.url?scp=85047396598&partnerID=8YFLogxK
U2 - 10.1111/sjpe.12179
DO - 10.1111/sjpe.12179
M3 - Journal articles
VL - 66
SP - 139
EP - 153
JO - Scottish Journal of Political Economy
JF - Scottish Journal of Political Economy
SN - 0036-9292
IS - 1
ER -