Reducing the Size Distortion of the KPSS Test
AbstractThis paper proposes a new stationarity test based on the KPSS test with less size distortion. We extend the boundary rule proposed by Sul, Phillips and Choi (2005) to the autoregressive spectral density estimator and parametrically estimate the long-run variance. We also derive the finite sample bias of the numerator of the test statistic up to the 1/T order and propose a correction to the bias term in the numerator. Finite sample simulations show that the correction term effectively reduces the bias in the numerator and that the finite sample size of our test is close to the nominal one as long as the long-run parameter in the model satisfies the boundary condition.
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Bibliographic InfoPaper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd09-085.
Date of creation: Sep 2009
Date of revision:
Stationary test; size distortion; boundary rule; bias correction;
Other versions of this item:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: 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-2009-10-10 (All new papers)
- NEP-ECM-2009-10-10 (Econometrics)
- NEP-ETS-2009-10-10 (Econometric Time Series)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Josep Carrion-i-Silvestre & Andreu Sansó, 2006. "A guide to the computation of stationarity tests," Empirical Economics, Springer, vol. 31(2), pages 433-448, June.
- Eiji Kurozumi & Daisuke Yamazaki & Kaddour Hadri, 2012. "Covariate Unit Root Test for Cross-Sectionally Dependent Panel Data," Global COE Hi-Stat Discussion Paper Series gd12-256, Institute of Economic Research, Hitotsubashi University.
- Anton Skrobotov, 2012. "Bias Correction of KPSS Test with Structural Break for Reducing of Size Distortion," Working Papers 0043, Gaidar Institute for Economic Policy, revised 2012.
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