SHOCK PERSISTENCE AND STRUCTURAL-CHANGE

Testing for unit roots, and the related issue of measuring shock persi stence, has attracted considerable econometric interest. The issue of the size of the random walk component raised by Cochrane (1988), has b een extended by Cogley (1990), Jaeger (1990), Leung (1992), and latter ly Mayadunne, Evans and Inder (1995). In this paper we add to the deba te by considering the effects of structural change on spectral-based m easures of persistence illustrating potential problems via three macro economic data examples. We find that significant structural breaks exi st in the majority of the series investigated and that measured persis tence differs markedly across distinct periods.