The fragility of the KPSS stationarity test
AbstractStationarity tests exhibit extreme size distortions if the observable process is stationary yet highly persistent. In this paper we provide a theoretical explanation for the size distortion of the KPSS test for DGPs with a broad range of first order autocorrelation coefficient. Considering a near-integrated, nearly stationary process we show that the asymptotic distribution of the test contains an additional term, which can potentially explain the amount of size distortion documented in previous simulation studies.
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Bibliographic InfoArticle provided by Springer in its journal Statistical Methods and Applications.
Volume (Year): 19 (2010)
Issue (Month): 2 (June)
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Web page: http://link.springer.de/link/service/journals/10260/index.htm
Other versions of this item:
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
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