The limiting distribution of the t-ratio for the unit root test in an AR(1)

Franz Dietrich

Econometrics Journal, 2001, vol. 4, issue 2, 5

Abstract: We consider the limiting distribution of the t -statistic for testing the random walk hypothesis in the classical Gaussian AR(1) model. Abadir (1995, Econometric Theory, 11, 775­793) derived the first derives a closed (i.e. integration-free) expression for the limit-ing distribution function. This paper derives an alternative closed expression. Abadir¹s and the new expression are valid only for negative arguments and each involve two infinite summa-tions. To enable a numerical treatment, we derive inequalities that allow a suitable truncation of all series occurring in Abadir¹s and the new expression. In both expressions the outer series has a very fast convergence so that truncation after only the first summand usually suffices. The inner series of the new expression displays the numerically desirable Leibnitz property. By differentiating we obtain a new closed expression for the limiting density function. We also find an asymptotic expansion for the lower tail of the limiting distribution function.

Keywords: Unit root test; t -ratio; Limiting distribution; Series truncation; Convergence speed; Leibnitz series. (search for similar items in EconPapers)
Date: 2001
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