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Testing for a Unit Root in Noncausal Autoregressive Models

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  • Pentti Saikkonen
  • Rickard Sandberg

Abstract

type="main" xml:id="jtsa12141-abs-0001"> This work develops maximum likelihood-based unit root tests in the noncausal autoregressive (NCAR) model with a non-Gaussian error term formulated by Lanne and Saikkonen (2011, Journal of Time Series Econometrics 3, Issue 3, Article 2). Finite-sample properties of the tests are examined via Monte Carlo simulations. The results show that the size properties of the tests are satisfactory and that clear power gains against stationary NCAR alternatives can be achieved in comparison with available alternative tests. In an empirical application to a Finnish interest rate series, evidence in favour of an NCAR model with leptokurtic errors is found.

Suggested Citation

  • Pentti Saikkonen & Rickard Sandberg, 2016. "Testing for a Unit Root in Noncausal Autoregressive Models," Journal of Time Series Analysis, Wiley Blackwell, vol. 37(1), pages 99-125, January.
    • Handle: RePEc:bla:jtsera:v:37:y:2016:i:1:p:99-125
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    Cited by:

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    2. Frédérique Bec & Heino Bohn Nielsen & Sarra Saïdi, 2020. "Mixed Causal–Noncausal Autoregressions: Bimodality Issues in Estimation and Unit Root Testing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(6), pages 1413-1428, December.
    3. Jean-Baptiste MICHAU, 2019. "Helicopter Drops of Money under Secular Stagnation," Working Papers 2019-10, Center for Research in Economics and Statistics.
    4. Alain Hecq & Sean Telg & Lenard Lieb, 2017. "Do Seasonal Adjustments Induce Noncausal Dynamics in Inflation Rates?," Econometrics, MDPI, vol. 5(4), pages 1-22, October.
    5. Frédérique Bec & Alain Guay & Heino Bohn Nielsen & Sarra Saïdi, 2022. "Power of unit root tests against nonlinear and noncausal alternatives," THEMA Working Papers 2022-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    6. Christian Gouriéroux & Yang Lu, 2023. "Noncausal affine processes with applications to derivative pricing," Mathematical Finance, Wiley Blackwell, vol. 33(3), pages 766-796, July.

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