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The effects of additive outliers on stationarity tests: a monte carlo study

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  • Olivier Darné

    ()
    (LAMETA-CNRS, Faculty of Economics, University of Montpellier I)

Abstract

Monte Carlo simulations are used to study the size and power properties of two stationarity tests developed by Kwiatkowski et al. (1992) [KPSS] and Leybourne and McCabe (1994) [LMC] when the data contain additive outliers. We show that the KPSS tests are very robust to additive outliers whereas the LMC test exhibits size distorsions and loss of power.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2004)
Issue (Month): 16 ()
Pages: 1-8

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Handle: RePEc:ebl:ecbull:eb-04c10004

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  1. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers, Michigan State - Econometrics and Economic Theory 8905, Michigan State - Econometrics and Economic Theory.
  2. Leybourne, S J & McCabe, B P M, 1994. "A Consistent Test for a Unit Root," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 12(2), pages 157-66, April.
  3. Caner, M. & Kilian, L., 2001. "Size distortions of tests of the null hypothesis of stationarity: evidence and implications for the PPP debate," Journal of International Money and Finance, Elsevier, Elsevier, vol. 20(5), pages 639-657, October.
  4. Shin, Dong Wan & Sarkar, Sahadeb & Lee, Jong Hyup, 1996. "Unit root tests for time series with outliers," Statistics & Probability Letters, Elsevier, Elsevier, vol. 30(3), pages 189-197, October.
  5. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, Elsevier, vol. 10(2), pages 139-162.
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Cited by:
  1. P. S. Sephton, 2010. "Unit roots and purchasing power parity: another kick at the can," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 42(27), pages 3439-3453.

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