Bootstrap Unit Root Tests in Models with GARCH(1,1) Errors
AbstractThis paper proposes a bootstrap unit root test in models with GARCH(1,1) errors and establishes its asymptotic validity under mild moment and distributional restrictions. While the proposed bootstrap test for a unit root shares the power enhancing properties of its asymptotic counterpart (Ling and Li, 2003), it offers a number of important advantages. In particular, the bootstrap procedure does not require explicit estimation of nuisance parameters that enter the distribution of the test statistic and corrects the substantial size distortions of the asymptotic test that occur for strongly heteroskedastic processes. The simulation results demonstrate the excellent finite-sample properties of the bootstrap unit root test for a wide range of GARCH specifications.
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Bibliographic InfoPaper provided by Concordia University, Department of Economics in its series Working Papers with number 09001.
Length: 41 pages
Date of creation: Jan 2009
Date of revision:
Unit root test; GARCH; Bootstrap;
Other versions of this item:
- Nikolay Gospodinov & Ye Tao, 2011. "Bootstrap Unit Root Tests in Models with GARCH(1,1) Errors," Econometric Reviews, Taylor and Francis Journals, vol. 30(4), pages 379-405.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-31 (All new papers)
- NEP-ECM-2009-01-31 (Econometrics)
- NEP-ETS-2009-01-31 (Econometric Time Series)
- NEP-ORE-2009-01-31 (Operations Research)
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