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Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?

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  • Kwiatkowski, Denis
  • Phillips, Peter C. B.
  • Schmidt, Peter
  • Shin, Yongcheol

Abstract

The standard conclusion that is drawn from this empirical evidence is that many or most aggregate economic time series contain a unit root. However, it is important to note that in this empirical work the unit root is set up as the null hypothesis testing is carried out ensures that the null hypothesis is accepted unless there is strong evidence against it. Therefore, an alternative explanation for the common failure to reject a unit root is simply that most economic time series are not very informative about whether or not there is a unit root; or, equivalently, that standard unit root tests are not very powerful against relevant alternatives.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 54 (1992)
Issue (Month): 1-3 ()
Pages: 159-178

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Handle: RePEc:eee:econom:v:54:y:1992:i:1-3:p:159-178

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Web page: http://www.elsevier.com/locate/jeconom

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  1. Perron, Pierre, 1988. "Trends and random walks in macroeconomic time series : Further evidence from a new approach," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 297-332.
  2. Park, Joon Y. & Phillips, Peter C.B., 1989. "Statistical Inference in Regressions with Integrated Processes: Part 2," Econometric Theory, Cambridge University Press, vol. 5(01), pages 95-131, April.
  3. Peter C.B. Phillips & Peter Schmidt, 1989. "Testing for a Unit Root in the Presence of Deterministic Trends," Cowles Foundation Discussion Papers 933, Cowles Foundation for Research in Economics, Yale University.
  4. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
  5. DeJong, David N, et al, 1992. "Integration versus Trend Stationarity in Time Series," Econometrica, Econometric Society, vol. 60(2), pages 423-33, March.
  6. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
  7. Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
  8. Peter C.B. Phillips, 1990. "To Criticize the Critics: An Objective Bayesian Analysis of Stochastic Trends," Cowles Foundation Discussion Papers 950, Cowles Foundation for Research in Economics, Yale University.
  9. Glenn D. Rudebusch, 1990. "Trends and random walks in macroeconomic time series: a re-examination," Working Paper Series / Economic Activity Section 105, Board of Governors of the Federal Reserve System (U.S.).
  10. Peter C.B. Phillips, 1988. "Spectral Regression for Cointegrated Time Series," Cowles Foundation Discussion Papers 872, Cowles Foundation for Research in Economics, Yale University.
  11. Busetti, Fabio & Harvey, Andrew, 2008. "Testing For Trend," Econometric Theory, Cambridge University Press, vol. 24(01), pages 72-87, February.
  12. Tanaka, Katsuto, 1990. "Testing for a Moving Average Unit Root," Econometric Theory, Cambridge University Press, vol. 6(04), pages 433-444, December.
  13. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May.
  14. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  15. Peter C.B. Phillips & Victor Solo, 1989. "Asymptotics for Linear Processes," Cowles Foundation Discussion Papers 932, Cowles Foundation for Research in Economics, Yale University.
  16. Tanaka, Katsuto, 1983. "Non-Normality of the Lagrange Multiplier Statistic for Testing the Constancy of Regression Coefficients," Econometrica, Econometric Society, vol. 51(5), pages 1577-82, September.
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