Nearly Efficient Likelihood Ratio Tests for Seasonal Unit Roots
AbstractIn an important generalization of zero frequency autoregressive unit root tests, Hylleberg, Engle, Granger, and Yoo (1990) developed regression-based tests for unit roots at the seasonal frequencies in quarterly time series. We develop likelihood ratio tests for seasonal unit roots and show that these tests are "nearly efficient" in the sense of Elliott, Rothenberg, and Stock (1996), i.e. that their asymptotic local power functions are indistinguishable from the Gaussian power envelope. Nearly efficient testing procedures for seasonal unit roots have been developed, including point optimal tests based on the Neyman-Pearson Lemma as well as regression-based tests, e.g. Rodrigues and Taylor (2007). However, both require the choice of a GLS detrending parameter, which our likelihood ratio tests do not.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 1224.
Length: 22 pages
Date of creation: Nov 2009
Date of revision:
Likelihood Ratio Test; Seasonal Unit Root Hypothesis;
Other versions of this item:
- Michael Jansson & Morten Ã˜rregaard Nielsen, 2011. "Nearly Efficient Likelihood Ratio Tests for Seasonal Unit Roots," Journal of Time Series Econometrics, De Gruyter, vol. 3(1), pages 5.
- Michael Jansson & Morten Ørregaard Nielsen, 2009. "Nearly Efficient Likelihood Ratio Tests for Seasonal Unit Roots," CREATES Research Papers 2009-55, School of Economics and Management, University of Aarhus.
- 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-2009-12-05 (All new papers)
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