 Efficient Tests of the Seasonal Unit Root Hypothesis*Paulo Rodrigues and Robert Taylor Discussion Papers from University of Nottingham, School of Economics Abstract: In this paper we derive, under the assumption of Gaussian errors with known error covariance matrix, asymptotic local power bounds for seasonal unit root tests for both known and unknown deterministic scenarios and for an arbitrary seasonal aspect. We demonstrate that the optimal test of a unit root at a given spectral frequency behaves asymptotically independently of whether unit roots exist at other frequencies or not. We also develop modified versions of the optimal tests which attain the asymptotic Gaussian power bounds under much weaker conditions. We further propose near-efficient regression-based seasonal unit root tests using pseudo-GLS de-trending and show that these have limiting null distributions and asymptotic local power functions of a known form. Monte Carlo experiments indicate that the regression-based tests perform well in finite samples. Keywords: Point optimal invariant (seasonal) unit root tests; asymptotic local power bounds; near seasonal integration (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:not:notecp:06/12 Access Statistics for this paper More papers in Discussion Papers from University of Nottingham, School of Economics School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC. |
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