Asymptotics for unit root tests under Markov regime-switching

Giuseppe Cavaliere

Econometrics Journal, 2003, vol. 6, issue 1, 193-216

Abstract: processes observationally equivalent and that unit root tests virtually have no power to detect stationary processes around switching trends, although autocorrelation-robust unit root tests are not affected by size distortions. Conversely, Markov switches in the mean of the transitory components do not change the usual asymptotic properties of the tests. Finally, it is shown that in large samples Markov-switching variances cause neither size distortions nor inconsistency of the tests. Copyright Royal Economic Society, 2003

Date: 2003
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