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Wavelet energy ratio unit root tests

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  • Mirza Trokić

Abstract

This article uses wavelet theory to propose a frequency domain nonparametric and tuning parameter-free family of unit root tests. The proposed test exploits the wavelet power spectrum of the observed series and its fractional partial sum to construct a test of the unit root based on the ratio of the resulting scaling energies. The proposed statistic enjoys good power properties and is robust to severe size distortions even in the presence of serially correlated MA(1) errors with a highly negative moving average (MA) parameter, as well as in the presence of random additive outliers. Any remaining size distortions are effectively eliminated using a novel wavestrapping algorithm.

Suggested Citation

  • Mirza Trokić, 2019. "Wavelet energy ratio unit root tests," Econometric Reviews, Taylor & Francis Journals, vol. 38(1), pages 69-94, January.
    • Handle: RePEc:taf:emetrv:v:38:y:2019:i:1:p:69-94
    DOI: 10.1080/07474938.2016.1222232
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    Cited by:

    1. Burak Alparslan Eroğlu & J. Isaac Miller & Taner Yiğit, 2022. "Time-varying cointegration and the Kalman filter," Econometric Reviews, Taylor & Francis Journals, vol. 41(1), pages 1-21, January.

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