Testing for non-stationarity and cointegration allowing for the possibility of a structural break: an application to EuroSterling interest rates

In this paper we examine the order of integration of EuroSterling interest rates by employing techniques that can allow for a structural break under the null and/or alternative hypothesis of the unit-root tests. In light of these results, we investigate the cointegrating relationship implied by the single, linear expectations hypothesis of the term structure of interest rates employing two techniques, one of which allows for the possibility of a break in the mean of the cointegrating relationship. The aim of the paper is to investigate whether or not the interest rate series can be viewed as I(1) processes and furthermore, to consider whether there has been a structural break in the series. We also determine whether, if we allow for a break in the cointegration analysis, the results are consistent with those obtained when a break is not allowed for. The main results reported in this paper support the conjecture that the ‘short’ Euro-currency rates are characterised as I(1) series that exhibit a structural break on or near Black Wednesday, 16 September 1992, whereas the ‘long’ rates are I(1) series that do not support the presence of a structural break. The evidence from the cointegration analysis suggests that tests of the expectations hypothesis based on data sets that include the ERM crisis period, or a period that includes a structural break, might be problematic if the structural break is not explicitly taken into account in the testing framework

Testing for a unit root in a process exhibiting a structural break in the presence of GARCH errors

This paper considers the effect of GARCH errors on the tests proposed byPerron (1997) for a unit root in the presence of a structural break. We assessthe impact of degeneracy and integratedness of the conditional varianceindividually and find that, apart from in the limit, the testing procedure isinsensitive to the degree of degeneracy but does exhibit an increasingover-sizing as the process becomes more integrated. When we consider the GARCHspecifications that we are likely to encounter in empirical research, we findthat the Perron tests are reasonably robust to the presence of GARCH and donot suffer from severe over-or under-rejection of a correct null hypothesis

A model for exchange rates with crawling bands: an application to the Colombian peso

This paper builds upon previous research on currency bands, and provides a model for the Colombian peso. Stochastic differential equations are combined with information related to the Colombian currency band to estimate competing models of the behaviour of the Colombian peso within the limits of the currency band. The resulting moments of the density function for the simulated returns describe adequately most of the characteristics of the sample returns data. The factor included to account for the intra-marginal intervention performed to drive the rate towards the Central Parity accounts only for 6.5% of the daily change, which supports the argument that intervention, if performed by the Central Bank, it is not directed to push the currency towards the limits. Moreover, the credibility of the Colombian Central Bank, Banco de la República’s ability to defend the band seems low

A comparison of extreme value theory approaches for determining value at risk

This paper compares a number of different extreme value models for determining the value at risk (VaR) of three LIFFE futures contracts. A semi-nonparametric approach is also proposed, where the tail events are modeled using the generalised Pareto distribution, and normal market conditions are captured by the empirical distribution function. The value at risk estimates from this approach are compared with those of standard nonparametric extreme value tail estimation approaches, with a small sample bias-corrected extreme value approach, and with those calculated from bootstrapping the unconditional density and bootstrapping from a GARCH(1,1) model. The results indicate that, for a holdout sample, the proposed semi-nonparametric extreme value approach yields superior results to other methods, but the small sample tail index technique is also accurate

Comparison of semirigorous and empirical models derived using data quality assessment methods

With the increase in available data and the stricter control requirements for mineral processes, the development of automated methods for data processing and model creation are becoming increasingly important. In this paper, the application of data quality assessment methods for the development of semirigorous and empirical models of a primary milling circuit in a platinum concentrator plant is investigated to determine their validity and how best to handle multivariate input data. The data set used consists of both routine operating data and planned step tests. Applying the data quality assessment method to this data set, it was seen that selecting the appropriate subset of variables for multivariate assessment was difficult. However, it was shown that it was possible to identify regions of sufficient value for modeling. Using the identified data, it was possible to fit empirical linear models and a semirigorous nonlinear model. As expected, models obtained from the routine operating data were, in general, worse than those obtained from the planned step tests. However, using the models obtained from routine operating data as the initial seed models for the automated advanced process control methods would be extremely helpful. Therefore, it can be concluded that the data quality assessment method was able to extract and identify regions sufficient and acceptable for modeling

Measuring the response of macroeconomic uncertainty to shocks

Recent research documents the importance of uncertainty in determining macroeconomic outcomes, but little is known about the transmission of uncertainty across such outcomes. This paper examines the response of uncertainty about inflation and output growth to shocks documenting statistically significant size and sign bias and spillover effects. Uncertainty about inflation is a determinant of output uncertainty, whereas higher growth volatility tends to raise inflation volatility. Both inflation and growth volatility respond asymmetrically to positive and negative shocks. Negative growth and inflation shocks lead to higher and more persistent uncertainty than shocks of equal magnitude but opposite sign

NiGa2_{2}O4_{4} interfacial layers in NiO/Ga2_{2}O3_{3} heterojunction diodes at high temperature

NiO/Ga$_{2}$O$_{3}$ heterojunction diodes have attracted attention for high-power applications, but their high-temperature performance and reliability remain underexplored. Here we report on the time evolution of the static electrical properties in the widely studied p-NiO/n-Ga$_{2}$O$_{3}$heterojunction diodes and the formation of NiGa$_{2}$O$_{4}$ interfacial layers when operated at $550^{\circ}$C. Results of our thermal cycling experiment show an initial leakage current increase which stabilizes after sustained thermal load, due to reactions at the NiO-Ga$_{2}$O$_{3}$ interface. High-resolution TEM microstructure analysis of the devices after thermal cycling indicates that the NiO-Ga$_{2}$O$_{3}$ interface forms ternary compounds at high temperatures, and thermodynamic calculations suggest the formation of the spinel NiGa$_{2}$O$_{4}$ layer between NiO and Ga$_{2}$O$_{3}$. First-principles defect calculations find that NiGa$_{2}$O$_{4}$ shows low p-type intrinsic doping, and hence can also serve to limit electric field crowding at the interface. Vertical NiO/Ga$_{2}$O$_{3}$ diodes with intentionally grown 5 nm thin spinel-type NiGa$_{2}$O$_{4}$ interfacial layers show excellent device ON/OFF ratio of > 10$^{10}$($\pm$3 V), V$_{ON}$ of ~1.9 V, and breakdown voltage of ~ 1.2 kV for an initial unoptimized 300-micron diameter device. These p-n heterojunction diodes are promising for high-voltage, high-temperature applications.Comment: 16 pages, 5 figure