Testing for Stochastic Unit Roots - Some Monte Carlo evidence

Robert Taylor and Dick van Dijk

No EI 9922-/A, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: This paper considers the properties of the tests of the null hypothesis of a random walk against the alternative of a stochastic unit root when the data are generated by a process related to, but not exactly equal to, the processes under the null and alternative. The extensive Monte Carlo experiments demonstrate that the test statistics are particularly sensitive to non-stationary RCAR processes with mean root less than unity, random walk processes with structural change in the variance, processes with changing persistence and trend-stationary processes with a break in the trend.

Keywords: monte carlo; random walk; stochastic unit root (search for similar items in EconPapers)
Date: 1999-05-26
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ems:eureir:1592

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