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A Powerful Test of the Autoregressive Unit Root Hypothesis Based on a Tuning Parameter Free Statistic

Morten Nielsen ()

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper presents a family of simple nonparametric unit root tests indexed by one parameter, d, and containing Breitung’s (2002) test as the special case d = 1. It is shown that (i) each member of the family with d > 0 is consistent, (ii) the asymptotic distribution depends on d, and thus reflects the parameter chosen to implement the test, and (iii) since the asymptotic distribution depends on d and the test remains consistent for all d > 0, it is possible to analyze the power of the test for different values of d. The usual Phillips-Perron or Dickey-Fuller type tests are indexed by bandwidth, lag length, etc., but have none of these three properties. It is shown that members of the family with d

Keywords: Augmented Dickey-Fuller test; fractional integration; GLS detrending; nonparametric; nuisance parameter; tuning parameter; power envelope; unit root test; variance ratio (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2008-06-30
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ftp://ftp.econ.au.dk/creates/rp/08/rp08_36.pdf (application/pdf)

Related works:
Journal Article: A POWERFUL TEST OF THE AUTOREGRESSIVE UNIT ROOT HYPOTHESIS BASED ON A TUNING PARAMETER FREE STATISTIC (2009) Downloads
Working Paper: A Powerful Test Of The Autoregressive Unit Root Hypothesis Based On A Tuning Parameter Free Statistic (2008) Downloads
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