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Testing For Seasonal Unit Roots In Periodic Integrated Autoregressive Processes

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  • Castro, Tomas del Barrio
  • Osborn, Denise R.

Abstract

This paper examines the implications of applying the Hylleberg, Engle, Granger, and Yoo (1990, Journal of Econometrics 44, 215–238) (HEGY) seasonal root tests to a process that is periodically integrated. As an important special case, the random walk process is also considered, where the zero-frequency unit root t-statistic is shown to converge to the Dickey–Fuller distribution and all seasonal unit root statistics diverge. For periodically integrated processes and a sufficiently high order of augmentation, the HEGY t-statistics for unit roots at the zero and semiannual frequencies both converge to the same Dickey–Fuller distribution. Further, the HEGY joint test statistic for a unit root at the annual frequency and all joint test statistics across frequencies converge to the square of this distribution. Results are also derived for a fixed order of augmentation. Finite-sample Monte Carlo results indicate that, in practice, the zero-frequency HEGY statistic (with augmentation) captures the single unit root of the periodic integrated process, but there may be a high probability of incorrectly concluding that the process is seasonally integrated.

Suggested Citation

  • Castro, Tomas del Barrio & Osborn, Denise R., 2008. "Testing For Seasonal Unit Roots In Periodic Integrated Autoregressive Processes," Econometric Theory, Cambridge University Press, vol. 24(4), pages 1093-1129, August.
    • Handle: RePEc:cup:etheor:v:24:y:2008:i:04:p:1093-1129_08
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    Cited by:

    1. Tomás del Barrio Castro & Gianluca Cubadda & Denise R. Osborn, 2022. "On cointegration for processes integrated at different frequencies," Journal of Time Series Analysis, Wiley Blackwell, vol. 43(3), pages 412-435, May.
    2. Tomas del Barrio Castro, 2007. "Using the HEGY Procedure When Not All Roots Are Present," Journal of Time Series Analysis, Wiley Blackwell, vol. 28(6), pages 910-922, November.
    3. Tomás Del Barrio Castro & Denise R. Osborn, 2011. "HEGY Tests in the Presence of Moving Averages," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(5), pages 691-704, October.
    4. del Barrio Castro, Tomás & Osborn, Denise R., 2023. "Periodic Integration and Seasonal Unit Roots," MPRA Paper 117935, University Library of Munich, Germany, revised 2023.
    5. del Barrio Castro, Tomás, 2021. "Testing for the cointegration rank between Periodically Integrated processes," MPRA Paper 106603, University Library of Munich, Germany, revised 2021.
    6. Politis, Dimitris, 2016. "HEGY test under seasonal heterogeneity," University of California at San Diego, Economics Working Paper Series qt2q4054kf, Department of Economics, UC San Diego.
    7. Erten, Irem & Okay, Nesrin, 2012. "Re-examining Turkey's trade deficit with structural breaks: Evidence from 1989-2011," MPRA Paper 56191, University Library of Munich, Germany.
    8. del Barrio Castro Tomás & Osborn Denise R, 2011. "Nonparametric Tests for Periodic Integration," Journal of Time Series Econometrics, De Gruyter, vol. 3(1), pages 1-35, February.
    9. Zou, Nan & Politis, Dimitris N., 2021. "Bootstrap seasonal unit root test under periodic variation," Econometrics and Statistics, Elsevier, vol. 19(C), pages 1-21.

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