On the Robustness of Unit Root Tests in the Presence of Double Unit Roots

Niels Haldrup () and Peter Lildholdt

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: We examine some of the consequences on commonly used unit root tests when the underlying series is integrated of order two rather than of order one. It turns out that standard augmented Dickey-Fuller type of tests for a single unit root have excessive density in the explosive region of the distribution. The lower (stationary) tail, however, will be virtually unaffected in the presence of double unit roots. On the other hand, the Phillips-Perron class of semi-parametric tests is shown to diverge to plus infinity asymptotically and thus favoring the explosive alternative. Numerical simulations are used to demonstrate the analytical results and some of the implications in finite samples.

Keywords: unit root tests; Dickey-Fuller test; Phillips-Perron test (search for similar items in EconPapers)
Date: 2000-06-08
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.escholarship.org/uc/item/2k0780sh.pdf;origin=repeccitec (application/pdf)

Related works:
Journal Article: On the Robustness of Unit Root Tests in the Presence of Double Unit Roots (2002)
Working Paper: On the Robustness of Unit Root Tests in the Presence of Double Unit Roots
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucsdec:qt2k0780sh

Access Statistics for this paper

More papers in University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().