This paper proposes and analyses a measure of distance for the unit root hypothesis tested against stochastic stationarity. It applies over a family of distributions, for any sample size, for any specification of deterministic components and under additional autocorrelation, here parameterised by a finite order moving-average. The measure is shown to obey a set of inequalities involving the measures of distance of Gibbs and Su (2002) which are also extended to include power. It is also shown to be a convex function of both the degree of a time polynomial regressors and the moving average parameters. Thus it is minimisable with respect to either. Implicitly, therefore, we find that linear trends and innovations having a moving average negative unit root will necessarily make power small. In the context of the Nelson and Plosser (1982) data, the distance is used to measure the impact that specification of the deterministic trend has on our ability to make unit root inferences. For certain series it highlights how imposition of a linear trend can lead to estimated models indistinguishable from unit root processes while freely estimating the degree of the trend yields a model very different in character.
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 Department of Economics, University of York in its series Discussion Papers with number
05/02.
Length: Date of creation: Date of revision: Handle: RePEc:yor:yorken:05/02
Contact details of provider: Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom Phone: (0)1904 433776 Fax: (0)1904 433759 Email: Web page: http://www.york.ac.uk/depts/econ/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Michael Shallcross).
Related research
Keywords:
Other versions of this item:
This paper has been announced in the following NEP Reports:
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.: