Breaking deterministics, test size and the efficient Wald test for fractional unit roots

Peter Sephton ()

Applied Economics Letters, 2012, vol. 19, issue 1, 83-85

Abstract: Lobato and Velasco (2007) introduced a test for a unit root against fractional alternatives with good power and performance properties. The purpose of this article is to examine the size of the test in the presence of level and trend breaks under the null hypothesis. The results suggest that test size remains relatively unaffected by level breaks but that the test can be undersized when there are breaking trends.

Date: 2012
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DOI: 10.1080/13504851.2011.568382

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