Advanced Search
MyIDEAS: Login to save this paper or follow this series

Unit Root Testing with Stationary Covariates and a Structural Break in the Trend Function

Contents:

Author Info

  • Fossati, Sebastian

    ()
    (University of Alberta, Department of Economics)

Abstract

The issue of testing for a unit root allowing for a structural break in the trend function is considered. The focus is on the construction of more powerful tests using the information in relevant multivariate data sets. The proposed test adopts the GLS detrending approach and uses correlated stationary covariates to improve power. As it is standard in the literature, the break date is treated as unknown. Asymptotic distributions are derived and a set of asymptotic and nite sample critical values are tabulated. Asymptotic local power functions show that power gains can be large. Finite sample results show that the test exhibits small size distortions and power that can be far beyond what is achievable by univariate tests.

Download Info

If 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.
File URL: http://www.economics.ualberta.ca/~/media/economics/FacultyAndStaff/WPs/WP2011-10-Fossati.pdf
File Function: Full text
Download Restriction: no

Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2011-10.

as in new window
Length: 49 pages
Date of creation: 01 May 2011
Date of revision:
Handle: RePEc:ris:albaec:2011_010

Contact details of provider:
Postal: 8-14 HM Tory, Edmonton, Alberta, T6G 2H4
Phone: (780) 492-3406
Fax: (780) 492-3300
Web page: http://www.economics.ualberta.ca/
More information through EDIRC

Related research

Keywords: unit root test; CLS detrending; structural break;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Fossati, Sebastian, 2012. "Covariate unit root tests with good size and power," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 56(11), pages 3070-3079.
  2. Vogelsang, T.J. & Perron, P., 1994. "Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 9422, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. Saikkonen, Pentti, 1991. "Asymptotically Efficient Estimation of Cointegration Regressions," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 7(01), pages 1-21, March.
  4. Graham Elliott & Michael Jansson, . "Testing for Unit Roots with Stationary Covariates," Economics Working Papers, School of Economics and Management, University of Aarhus 2000-6, School of Economics and Management, University of Aarhus.
  5. Lawrence J. Christiano, 1988. "Searching For a Break in GNP," NBER Working Papers 2695, National Bureau of Economic Research, Inc.
  6. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, Econometric Society, vol. 59(3), pages 817-58, May.
  7. Cavaliere, Giuseppe & Harvey, David I. & Leybourne, Stephen J. & Taylor, A.M. Robert, 2011. "Testing For Unit Roots In The Presence Of A Possible Break In Trend And Nonstationary Volatility," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 27(05), pages 957-991, October.
  8. Galvao Jr., Antonio F., 2009. "Unit root quantile autoregression testing using covariates," Journal of Econometrics, Elsevier, Elsevier, vol. 152(2), pages 165-178, October.
  9. PERRON, Pierre & RODRIGUEZ, Gabriel, 1998. "GLS Detrending, Efficient Unit Root Tests and Structural Change," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9809, Universite de Montreal, Departement de sciences economiques.
  10. Stock, James H., 1991. "Confidence intervals for the largest autoregressive root in U.S. macroeconomic time series," Journal of Monetary Economics, Elsevier, Elsevier, vol. 28(3), pages 435-459, December.
  11. Hansen, Bruce E., 1995. "Rethinking the Univariate Approach to Unit Root Testing: Using Covariates to Increase Power," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 11(05), pages 1148-1171, October.
  12. Elena Pesavento, 2006. "Near-optimal Unit Root Test with Stationary Covariate with Better Finite Sample Size," Emory Economics, Department of Economics, Emory University (Atlanta) 0606, Department of Economics, Emory University (Atlanta).
  13. Glenn D. Rudebusch, 1992. "The uncertain unit root in real GNP," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 193, Board of Governors of the Federal Reserve System (U.S.).
  14. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
  15. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers, Princeton, Department of Economics - Econometric Research Program 338, Princeton, Department of Economics - Econometric Research Program.
  16. Harris, David & Harvey, David I. & Leybourne, Stephen J. & Taylor, A.M. Robert, 2009. "Testing For A Unit Root In The Presence Of A Possible Break In Trend," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 25(06), pages 1545-1588, December.
  17. Peter C.B. Phillips, 1985. "Time Series Regression with a Unit Root," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
  18. Carrion-i-Silvestre, Josep Lluís & Kim, Dukpa & Perron, Pierre, 2009. "Gls-Based Unit Root Tests With Multiple Structural Breaks Under Both The Null And The Alternative Hypotheses," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 25(06), pages 1754-1792, December.
  19. Perron, P., 1990. "Further Evidence On Breaking Trend Functions In Macroeconomics Variables," Papers, Princeton, Department of Economics - Econometric Research Program 350, Princeton, Department of Economics - Econometric Research Program.
  20. Caporale, Guglielmo Maria & Pittis, Nikitas, 1999. " Unit Root Testing Using Covariates: Some Theory and Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 583-95, November.
  21. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 64(4), pages 813-36, July.
  22. Mohitosh Kejriwal & Pierre Perron, 2006. "Unit Root Tests Allowing for a Break in the Trend Function at an Unknown Time Under Both the Null and Alternative Hypotheses," Boston University - Department of Economics - Working Papers Series, Boston University - Department of Economics WP2006-052, Boston University - Department of Economics.
  23. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, Econometric Society, vol. 69(6), pages 1519-1554, November.
  24. David H Papell & Ruxandra Prodan, 2007. "Restricted Structural Change And The Unit Root Hypothesis," Economic Inquiry, Western Economic Association International, vol. 45(4), pages 834-853, October.
  25. Papell, David H & Prodan, Ruxandra, 2004. "The Uncertain Unit Root in U.S. Real GDP: Evidence with Restricted and Unrestricted Structural Change," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 36(3), pages 423-27, June.
  26. Juhl, Ted & Xiao, Zhijie, 2003. "Power Functions And Envelopes For Unit Root Tests," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 19(02), pages 240-253, April.
  27. Gabriel Rodriguez, 2006. "Finite Sample Behaviour of the Level Shift Model using Quasi-Differenced Data," Working Papers, University of Ottawa, Department of Economics 0604E, University of Ottawa, Department of Economics.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ris:albaec:2011_010. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Brenda Carrier).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.