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Unit root testing

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  • Wolters, Jürgen
  • Hassler, Uwe

Abstract

The occurrence of unit roots in economic time series has far reaching consequences for univariate as well as multivariate econometric modelling. Therefore, unit root tests are nowadays the starting point of most empirical time series studies. The oldest and most widely used test is due to Dickey and Fuller (1979). Reviewing this test and variants thereof we focus on the importance of modelling the deterministic component. In particular, we survey the growing literature on tests accounting for structural shifts. Finally, further applied aspects are addressed how to get the size correct and obtain good power at the same time. --

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Bibliographic Info

Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2005/23.

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Date of creation: 2005
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Handle: RePEc:zbw:fubsbe:200523

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Keywords: Dickey-Fuller; size and power; deterministic components; structural breaks;

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References

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Citations

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Cited by:
  1. Artur C. B. da Silva Lopes, 2004. "Deterministic Seasonality in Dickey-Fuller Tests: Should We Care?," Econometrics 0402007, EconWPA, revised 18 Mar 2004.
  2. Jörg Breitung & M. Hashem Pesaran, 2005. "Unit Roots and Cointegration in Panels," IEPR Working Papers 05.32, Institute of Economic Policy Research (IEPR).
  3. Kappler, Marcus, 2006. "Panel Tests for Unit Roots in Hours Worked," ZEW Discussion Papers 06-22, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. repec:ebl:ecbull:v:3:y:2007:i:23:p:1-15 is not listed on IDEAS
  5. Matei Demetrescu, 2009. "Panel unit root testing and the martingale difference hypothesis for German stocks," Economics Bulletin, AccessEcon, vol. 29(3), pages 1749-1759.
  6. Uwe Hassler & Jürgen Wolters, 2009. "Hysteresis in Unemployment Rates? A Comparison between Germany and the US," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(2-3), pages 119-129, June.

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