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A Powerful Tuning Parameter Free Test Of The Autoregressive Unit Root Hypothesis

Morten Nielsen ()

No 1175, Working Paper from Economics Department, Queen's University

Abstract: This paper presents a family of simple nonparametric unit root tests indexed by one parameter, d, and containing Breitung's (2002) test as the special case d = 1. It is shown that (i) each member of the family with d > 0 is consistent, (ii) the asymptotic distribution depends on d, and thus reflects the parameter chosen to implement the test, and (iii) since the asymptotic distribution depends on d and the test remains consistent for all d > 0, it is possible to analyze the power of the test for different values of d. The usual Phillips-Perron or Dickey-Fuller type tests are characterized by tuning parameters (bandwidth, lag length, etc.), i.e. parameters which change the test statistic but are not reflected in the asymptotic distribution, and thus have none of these three properties.It is shown that members of the family with d

Keywords: augmented Dickey-Fuller test; fractional integration; GLS detrending; nonparametric; nuisance parameter; tuning parameter; power envelope; unit root test; variance ratio (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets
Date: 2008-07
References: View references in EconPapers View complete reference list from CitEc
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