Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?

Denis Kwiatkowski, Peter Phillips and Peter Schmidt
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Denis Kwiatkowski: Central Michigan University

No 979, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The standard conclusion that is drawn from this empirical evidence is that many or most aggregate economic time series contain a unit root. However, it is important to note that in this empirical work the unit root is set up as the null hypothesis testing is carried out ensures that the null hypothesis is accepted unless there is strong evidence against it. Therefore, an alternative explanation for the common failure to reject a unit root is simply that most economic time series are not very informative about whether or not there is a unit root; or, equivalently, that standard unit root tests are not very powerful against relevant alternatives.

Keywords: Unit root; time series; stationarity; hypothesis testing (search for similar items in EconPapers)
JEL-codes: C12 C52 (search for similar items in EconPapers)
Pages: 28 pages
Date: 1991-05
Note: CFP 827.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

Published in Journal of Econometrics (1992), 54: 159-178

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Related works:
Journal Article: Testing the null hypothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root? (1992)
Working Paper: Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root: How Sure are we that Economic Time Series have a Unit Root? (1990)
Software Item: KPSS: RATS procedure to perform KPSS (Kwiatowski, Phillips, Schmidt, and Shin) stationarity test
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