Sign tests for unit root and change in persistence

Marilena Furno

International Journal of Computational Economics and Econometrics, 2014, vol. 4, issue 3/4, 269-287

Abstract: The behaviour of unit root tests defined in terms of sign transform is here analysed. The sign transform allows us to gain robustness to non-normality. Contrarily to the standard unit root tests, our results show that these tests are very reliable in the presence of breaks, provided there is no change in the persistence of a series. In case of change in persistence, the paper proposes to compare sign-based test functions separately computed before and after the change point. A statistically significant difference would signal the presence of change in persistence. An example and a Monte Carlo study conclude the analysis.

Keywords: stationarity; unit root tests; robust procedure; L 1 -norm; change in persistence; sign transform; Monte Carlo simulation. (search for similar items in EconPapers)
Date: 2014
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