Reducing the Size Distortion of the KPSS Test

Eiji Kurozumi (kurozumi@stat.hit-u.ac.jp) and Shinya Tanaka

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper proposes a new stationarity test based on the KPSS test with less size distortion. We extend the boundary rule proposed by Sul, Phillips and Choi (2005) to the autoregressive spectral density estimator and parametrically estimate the long-run variance. We also derive the finite sample bias of the numerator of the test statistic up to the 1/T order and propose a correction to the bias term in the numerator. Finite sample simulations show that the correction term effectively reduces the bias in the numerator and that the finite sample size of our test is close to the nominal one as long as the long-run parameter in the model satisfies the boundary condition.

Keywords: Stationary test; size distortion; boundary rule; bias correction (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-ecm and nep-ets
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Related works:
Journal Article: Reducing the size distortion of the KPSS test (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hst:ghsdps:gd09-085

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