A Fixed-b Perspective on the Phillips-Perron Unit Root Tests
AbstractWe extend fixed-b asymptotic theory to the nonparametric Phillips-Perron (PP) unit root tests. We show that the fixed-b limits depend on nuisance parameters in a complicated way. These non-pivotal limits provide an alternative theoretical explanation for the well known finite sample problems of PP tests. We also show that the fixed-b limits depend on whether deterministic trends are removed using one-step or two-step approaches, contrasting the asymptotic equivalence of the one- and two-step approaches under a consistency approximation for the long run variance estimator. Based on these results we introduce modified PP tests that allow for fixed-b inference. The theoretical analysis is cast in the framework of near-integrated processes which allows to study the asymptotic behavior both under the unit root null hypothesis as well as for local alternatives. The performance of the original and modified tests is compared by means of local asymptotic power and a small simulation study.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for Advanced Studies in its series Economics Series with number 272.
Length: 19 pages
Date of creation: Jul 2011
Date of revision:
Contact details of provider:
Postal: Stumpergasse 56, A-1060 Vienna, Austria
Phone: ++43 - (0)1 - 599 91 - 0
Fax: ++43 - (0)1 - 599 91 - 555
Web page: http://www.ihs.ac.at/index.php3?id=310
More information through EDIRC
Postal: Institute for Advanced Studies - Library, Stumpergasse 56, A-1060 Vienna, Austria
Other versions of this item:
- Vogelsang, Timothy J. & Wagner, Martin, 2013. "A FIXED-b PERSPECTIVE ON THE PHILLIPS–PERRON UNIT ROOT TESTS," Econometric Theory, Cambridge University Press, vol. 29(03), pages 609-628, June.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-02 (All new papers)
- NEP-ECM-2011-08-02 (Econometrics)
- NEP-ETS-2011-08-02 (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.:
- Kiefer, Nicholas M. & Vogelsang, Timothy J., 2005.
"A New Asymptotic Theory for Heteroskedasticity-Autocorrelation Robust Tests,"
05-08, Cornell University, Center for Analytic Economics.
- Kiefer, Nicholas M. & Vogelsang, Timothy J., 2005. "A New Asymptotic Theory For Heteroskedasticity-Autocorrelation Robust Tests," Econometric Theory, Cambridge University Press, vol. 21(06), pages 1130-1164, December.
- Schwert, G William, 1989.
"Tests for Unit Roots: A Monte Carlo Investigation,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 7(2), pages 147-59, April.
- Perron, Pierre & Vogelsang, Timothy J, 1992. "Testing for a Unit Root in a Time Series with a Changing Mean: Corrections and Extensions," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 467-70, October.
- Nigar Hashimzade & Timothy J. Vogelsang, 2008.
"Fixed-b asymptotic approximation of the sampling behaviour of nonparametric spectral density estimators,"
Journal of Time Series Analysis,
Wiley Blackwell, vol. 29(1), pages 142-162, 01.
- Hashimzade, Nigar & Vogelsang, Timothy, 2006. "Fixed-b Asymptotic Approximation of the Sampling Behavior of Nonparametric Spectral Density Estimators," Working Papers 06-04, Cornell University, Center for Analytic Economics.
- Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
- Jansson, Michael, 2002. "Consistent Covariance Matrix Estimation For Linear Processes," Econometric Theory, Cambridge University Press, vol. 18(06), pages 1449-1459, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Doris Szoncsitz).
If references are entirely missing, you can add them using this form.