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Unit Root Tests and the Burden of Proof

Author

Listed:
  • Robert A. Amano

    (Bank of Canada)

  • Simon van Norden

    (Bank of Canada)

Abstract

Simulation evidence is presented on the finite sample properties of two tests for stationarity recently proposed by Kwiatkowski, Phillips and Schmidt (1991) and Park (1990). Unlike earlier unit-root tests, these test the null of stationarity against the alternative of a unit root, thereby reversing the usual burden of proof. We also examine the consequenes of using the Kwiatkowski, Phillips and Schmidt test in conjuction with a standard unit-root test. These results suggest that the frequency of incorrect conclusions may be decreased relative to the application of only standard unit-root tests. Also, such a joint testing procedure may in some cases permit researchers to be more confident about their tests' results.

Suggested Citation

  • Robert A. Amano & Simon van Norden, 1995. "Unit Root Tests and the Burden of Proof," Econometrics 9502005, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpem:9502005
    Note: 20 pages, Postscript, includes tables. File compressed in a single Info-zip archive, then uuencoded.
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    References listed on IDEAS

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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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