Range unit root tests

Felipe M. Aparicio and Ana García
Authors registered in the RePEc Author Service: Alvaro Escribano

DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística

Abstract: Since the seminal paper by Dickey and Fuller in 1979, unit-root tests have conditioned the standard approaches to analyse time series with strong serial dependence, the focus being placed in the detection of eventual unit roots in an autorregresive model fitted to the series. In this paper we propose a completely different method to test for the type of "long-wave" patterns observed not only in unit root time series but also in series following more complex data generating mechanism. To this end, our testing device analyses the trend exhibit by the data, without imposing any constraint on the generating mechanism. We call our device the Range Unit Root (RUR) Test since it is constructed from running ranges of the series. These statistics allow a more general characterization of a strong serial dependence in the mean behavior, thus endowing our test with a number of desirable properties. Among these properties are the invariance to nonlinear monotonic transformations of the series and the robustness to the presence of level shifts and additive outliers. In addition, the RUR test outperforms the power of standard unit root tests on near-unit-root stationary time series.

Date: 2003-02
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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Working Paper: A range unit root test (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wsrepe:ws031126

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