Impacts of the initial observation on unit root tests using recursive demeaning and detrending procedures

Ming Meng, Hyejin Lee, Myeong Hyeon Cho and Junsoo Lee ()

Economics Letters, 2013, vol. 120, issue 2, 195-199

Abstract: The use of recursive demeaning and detrending procedures in unit root tests has been popular in the literature, since they lead to more precise estimation of the persistence parameter and greater power in unit root tests. However, we find that unit root tests using these recursive procedures tend to lose power significantly when the initial value is very large.

Keywords: Initial condition; Recursive demeaning; Recursive detrending; Unit root tests (search for similar items in EconPapers)
JEL-codes: C12 C15 C22 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:120:y:2013:i:2:p:195-199

DOI: 10.1016/j.econlet.2013.03.033

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