Nearly Efficient Likelihood Ratio Tests of the Unit Root Hypothesis

Michael Jansson and Morten Nielsen

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

Abstract: Seemingly absent from the arsenal of currently available "nearly efficient" testing procedures for the unit root hypothesis, i.e. tests whose local asymptotic power functions are indistinguishable from the Gaussian power envelope, is a test admitting a (quasi-)likelihood ratio interpretation. We show that the likelihood ratio unit root test derived in a Gaussian AR(1) model with standard normal innovations is nearly efficient in that model. Moreover, these desirable properties carry over to more complicated models allowing for serially correlated and/or non-Gaussian innovations.

Keywords: Likelihood Ratio Test; Unit Root Hypothesis (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Pages: 16
Date: 2009-08-31
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Nearly Efficient Likelihood Ratio Tests of the Unit Root Hypothesis (2012)
Working Paper: Nearly Efficient Likelihood Ratio Tests Of The Unit Root Hypothesis (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2009-37

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