Nearly Efficient Likelihood Ratio Tests of the Unit Root Hypothesis

Michael Jansson () and Morten Ørregaard Nielsen ()

No 1213, Working Papers from Queen's University, Department of Economics

Abstract: Seemingly absent from the arsenal of currently available "nearly efficient" testing procedures for the unit root hypothesis, i.e. tests whose local asymptotic power functions are indistinguishable from the Gaussian power envelope, is a test admitting a (quasi-)likelihood ratio interpretation. We show that the likelihood ratio unit root test derived in a Gaussian AR(1) model with standard normal innovations is nearly efficient in that model. Moreover, these desirable properties carry over to more complicated models allowing for serially correlated and/or non-Gaussian innovations.

JEL-codes: C22 (search for similar items in EconPapers)
Date: 2009-08

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Related works:
Working Paper: Nearly Efficient Likelihood Ratio Tests of the Unit Root Hypothesis (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:qed:wpaper:1213

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