Rethinking the Univariate Approach to Unit Root Testing: Using Covariates to Increase Power

Bruce E. Hansen ()

Econometric Theory, 1995, vol. 11, issue 05, pages 1148-1171

Abstract: In the context of testing for a unit root in a univariate time series, the convention is to ignore information in related time series. This paper shows that this convention is quite costly, as large power gains can be achieved by including correlated stationary covariates in the regression equation.

Date: 1995
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Persistent link: http://EconPapers.repec.org/RePEc:cup:etheor:v:11:y:1995:i:05:p:1148-1171_00

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