ADMISSIBLE AND NONADMISSIBLE TESTS IN UNIT-ROOT-LIKE SITUATIONS

Werner Ploberger

Econometric Theory, 2008, vol. 24, issue 01, pages 15-42

Abstract: This paper investigates the asymptotic behavior of tests in situations where the likelihood is locally asymptotically quadratic. Necessary and sufficient conditions are given for a test to be admissible. Even without these restrictive parametric assumptions, it is shown that certain common procedures such as the augmented Dickey Fuller test in cases where no deterministic trend is present or standard tests for restrictions on cointegrating relationships are asymptotically inadmissible. These results confirm the existence of tests that dominate these classical tests for all parameters.I express my gratitude to the editors, H. L tkepohl and especially Peter C.B. Phillips, for their help, which enormously exceeded the usual amount of support. Also I thank the referees for their helpful comments. Their contribution greatly improved the paper. All remaining errors are mine.

Date: 2008
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Working Paper: Admissible and Nonadmissible Test in Unit-Root-like Situations (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:cup:etheor:v:24:y:2008:i:01:p:15-42_08

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