Robust inference on seasonal unit roots via a bootstrap applied to OECD macroeconomic series

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Robust inference on seasonal unit roots via a bootstrap applied to OECD macroeconomic series

Author Info

Peter Burridge (Department of Economics, City University, London)
Frida Gjorstrup
A.M. Robert Taylor

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Abstract

Recent experimental results presented in Burridge and Taylor (2001a,b, and 2003) show that, as usually implemented, the Hylleberg et al. (1990) seasonal unit root tests can be rather liberal, with true level often substantially higher than nominal level. This effect is due to the presence of any of three things: data-based lag selection in the implementation of the tests, and either or both periodic heteroscedasticity and serial correlation in the driving shocks. Burridge and Taylor (2003) demonstrate that under experimental conditions a carefully implemented bootstrap substantially corrects test level without loss of power. The present study applies their technique to a large number of publicly available series, and demonstrates conclusively that the bootstrap produces less liberal, and, given the experimental results cited above, more reliable inference. We report results for Sweden, the UK and the US, which are typical of the fifteen countries in our panel. Other results, the GAUSS code, and raw data are all available at: www.staff.city.ac.uk/~peterbu/

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Paper provided by Department of Economics, City University, London in its series City University Economics Discussion Papers with number 04/08.

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Length: 31 pages
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:cty:dpaper:0408

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Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing

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Hylleberg, S. & Engle, R. F. & Granger, C. W. J. & Yoo, B. S., 1990. "Seasonal integration and cointegration," Journal of Econometrics, Elsevier, vol. 44(1-2), pages 215-238. [Downloadable!] (restricted)
Other versions:
- Hyllerberg, S. & Engle, R.F. & Granger, C.W.J. & Yoo, B.S., 1988. "Seasonal Integration And Cointegration," Papers 0-88-2, Pennsylvania State - Department of Economics.
- Hylleberg, S. & Engle, R.F. & Granger, C.W.J. & Yoo, B.S., 1988. "Seasonal, Integration And Cointegration," Papers 6-88-2, Pennsylvania State - Department of Economics.
Rodrigues, Paulo M. M. & Taylor, A. M. Robert, 2004. "Alternative estimators and unit root tests for seasonal autoregressive processes," Journal of Econometrics, Elsevier, vol. 120(1), pages 35-73, May. [Downloadable!] (restricted)
Burridge, Peter & Taylor, A. M. Robert, 2001. "On regression-based tests for seasonal unit roots in the presence of periodic heteroscedasticity," Journal of Econometrics, Elsevier, vol. 104(1), pages 91-117, August. [Downloadable!] (restricted)
Other versions:
- Burridge, P. & Taylor, A.M.R., 1999. "On Regression-Based Tests for Seasonal Unit Roots in the Presence of Periodic Heteroscedasticity," Discussion Papers 99-10, Department of Economics, University of Birmingham.
Taylor, A. M. Robert, 1997. "On the practical problems of computing seasonal unit root tests," International Journal of Forecasting, Elsevier, vol. 13(3), pages 307-318, September. [Downloadable!] (restricted)
Burridge, Peter & Taylor, A M Robert, 2001. "On the Properties of Regression-Based Tests for Seasonal Unit Roots in the Presence of Higher-Order Serial Correlation," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(3), pages 374-79, July.
Horowitz, Joel L. & Savin, N. E., 2000. "Empirically relevant critical values for hypothesis tests: A bootstrap approach," Journal of Econometrics, Elsevier, vol. 95(2), pages 375-389, April. [Downloadable!] (restricted)
Burridge, Peter & Robert Taylor, A. M., 2004. "Bootstrapping the HEGY seasonal unit root tests," Journal of Econometrics, Elsevier, vol. 123(1), pages 67-87, November. [Downloadable!] (restricted)
Other versions:
- Robert Taylor & Peter Burridge, 2004. "Bootstrapping the HEGY Seasonal Unit Root Tests," Econometric Society 2004 North American Summer Meetings 125, Econometric Society. [Downloadable!]
Smith, Richard J. & Taylor, A. M. Robert, 1998. "Additional critical values and asymptotic representations for seasonal unit root tests," Journal of Econometrics, Elsevier, vol. 85(2), pages 269-288, August. [Downloadable!] (restricted)
Other versions:
- Smith, R.J. & Taylor, R., 1995. "Additional Critical Values and Asymptotic Representations for Seasonal Unit Roots Tests," Cambridge Working Papers in Economics 9529, Faculty of Economics, University of Cambridge.
- Richard Smith & Robert Taylor, . "Additional Critical Values and Asymptotic Representations for Seasonal Unit Root Tests," Discussion Papers 95/43, Department of Economics, University of York.
Joseph Beaulieu, J. & Miron, Jeffrey A., 1993. "Seasonal unit roots in aggregate U.S. data," Journal of Econometrics, Elsevier, vol. 55(1-2), pages 305-328. [Downloadable!] (restricted)
Other versions:
- J. Joseph Beaulieu & Jeffrey A. Miron, 1992. "Seasonal Unit Roots in Aggregate U.S. Data," NBER Technical Working Papers 0126, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Taylor, A M Robert, 2000. " The Finite Sample Effects of Deterministic Variables on Conventional Methods of Lag-Selection in Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(2), pages 293-304, May. [Downloadable!] (restricted)
Other versions:
- Taylor, A.M.R., 1999. "The Finite Sample Effects of Deterministic Variables on Conventional Methods of Lag-Selection in Unit Root Tests," Discussion Papers 99-14, Department of Economics, University of Birmingham.

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