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Nearly Efficient Likelihood Ratio Tests for Seasonal Unit Roots

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Author Info

  • Michael Jansson

    ()
    (UC Berkeley and CREATES)

  • Morten Ørregaard Nielsen

    ()
    (Queen's University and CREATES)

Abstract

In an important generalization of zero frequency autore- gressive unit root tests, Hylleberg, Engle, Granger, and Yoo (1990) developed regression-based tests for unit roots at the seasonal frequencies in quarterly time series. We develop likelihood ratio tests for seasonal unit roots and show that these tests are "nearly efficient" in the sense of Elliott, Rothenberg, and Stock (1996), i.e. that their local asymptotic power functions are indistinguishable from the Gaussian power envelope. Currently available nearly efficient testing procedures for seasonal unit roots are regression-based and require the choice of a GLS detrending parameter, which our likelihood ratio tests do not.

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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2009-55.

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Length: 17
Date of creation: 24 Nov 2009
Date of revision:
Handle: RePEc:aah:create:2009-55

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Web page: http://www.econ.au.dk/afn/

Related research

Keywords: Likelihood Ratio Test; Seasonal Unit Root Hypothesis;

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