Specification sensitivities in the Markov-switching unit root test for bubbles

Shu Ping Shi

doi:10.1007/s00181-012-0635-8

Specification sensitivities in the Markov-switching unit root test for bubbles

Shu Ping Shi^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

20 Citations (Scopus)

Abstract

The aim of this article is to provide some empirical guidelines for the practical implementation of the Markov-switching augmented Dickey-Fuller (MSADF) test proposed by Hall et al. (J Appl Econom 14:143-154, 1999) for detecting explosive bubble behavior. We conduct simulation studies to compare the performance of the MSADF test under different error variance specifications, namely the constant variance and regime-dependent variance assumptions. An empirical application to the money base, consumer price and exchange rate in Argentina reveals the practical importance of the error variance specification on the MSADF test outcomes.

Original language	English
Pages (from-to)	697-713
Number of pages	17
Journal	Empirical Economics
Volume	45
Issue number	2
DOIs	https://doi.org/10.1007/s00181-012-0635-8
Publication status	Published - Oct 2013
Externally published	Yes

Keywords

Error variance
Independent Markov-switching bubble process
Markov-switching unit root test
Rational bubble

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10.1007/s00181-012-0635-8

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Specification sensitivities in the Markov-switching unit root test for bubbles

Abstract

Keywords

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