Residual Augmented Fourier ADF Unit Root Test

Veli Yilanci, Mücahit Aydın and Mehmet Aydin

MPRA Paper from University Library of Munich, Germany

Abstract: This paper proposes a residual-based unit root test in the presence of smooth structural changes approximated by a Fourier function. While Fourier Augmented Dickey Fuller test that introduced by Enders and Lee (2012a) allows smooth changes of the unknown form, the Residual Augmented Least Squares procedure use additional higher moment information found in non-normal errors. The test offers a simple way to accommodate an unknown number and form of structural breaks and have good size and power properties in the case of non-normal errors.

Keywords: Non-normal errors; Fourier Function; Unit root. (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Date: 2019-11-03
New Economics Papers: this item is included in nep-ecm and nep-ets
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