The KPSS test is very popular and used extensively by practitioners. The test considers two models under the null: stationarity around a deterministic level or around a deterministic trend. There is no study, as far as we know, on the statistical properties of the test when the wrong model is used. This paper endeavours to fill this gap. We found, using simulation, that choosing a deterministic trend when a deterministic level is true does not affect significantly the properties of the test. But, choosing a deterministic level when a deterministic trend is true lead to extreme over-rejection of the null. These results are obtained for i:i:d and autocorrelated errors.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by University of Liverpool Management School in its series Research Papers with number
200622.
Length: 9 pages Date of creation: 2006 Date of revision: Handle: RePEc:liv:livedp:200622
Contact details of provider: Postal: Management School University of Liverpool, Chatham Street, Liverpool, L69 7ZH, Great Britain Phone: +44(0)151 795 3108 Fax: +44(0)151 795 3004 Web page: http://www.liv.ac.uk/management/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Simon Blackman).