Testing for Unit Roots with Stationary Covariates

Graham Elliott () and Michael Jansson

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

Abstract: We derive the family of tests for a unit root with maximal power against a point alternative when an arbitrary number of stationary covariates are modeled with the potentially integrated series. We show that very large power gains are available when such covariates available. We then derive tests which are simple to construct (involving the running of vector autoregressions) and achieve at a point the power envelopes derived under very general conditions. These tests are excellent properties in small samples. We also show that these are obvious and internally consistent tests to run when identifying structural VAR's using long run restrictions.

Keywords: unit roots; power envelopes; structural vector autoregressions (search for similar items in EconPapers)
Date: 2002-07-31
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Related works:
Journal Article: Testing for unit roots with stationary covariates (2003)
Working Paper: Testing for Unit Roots with Stationary Covariates (2002)
Working Paper: Testing for Unit Roots with Stationary Covariances (2000)
Working Paper: Testing for Unit Roots with Stationary Covariances (2000)
Working Paper: Testing for Unit Roots with Stationary Covariates
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