IDEAS home Printed from https://ideas.repec.org/a/bla/manchs/v76y2008i5p528-538.html
   My bibliography  Save this article

Finite Sample Effects Of Pure Seasonal Mean Shifts On Dickey-Fuller Tests: A Simulation Study

Author

Listed:
  • ARTUR C. B. DA SILVA LOPES

Abstract

In this paper, it is demonstrated by simulation that, contrary to a widely held belief, pure seasonal mean shifts-i.e. seasonal structural breaks which affect only the seasonal cycle-really do matter for Dickey-Fuller long-run unit root tests. Both size and power properties are affected by such breaks but using the t-sig method for lag selection induces a stabilizing effect. Although most results are reassuring when the t-sig method is used, some concern with this type of breaks cannot be disregarded. Further evidence on the poor performance of the t-sig method for quarterly time series in standard (no-break) cases is also presented. Copyright © 2008 The Author. Journal compilation © 2008 Blackwell Publishing Ltd and The University of Manchester.

Suggested Citation

  • Artur C. B. Da Silva Lopes, 2008. "Finite Sample Effects Of Pure Seasonal Mean Shifts On Dickey-Fuller Tests: A Simulation Study," Manchester School, University of Manchester, vol. 76(5), pages 528-538, September.
  • Handle: RePEc:bla:manchs:v:76:y:2008:i:5:p:528-538
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9957.2008.01074.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Harvey, David I. & Leybourne, Stephen J. & Newbold, Paul, 2002. "Seasonal unit root tests with seasonal mean shifts," Economics Letters, Elsevier, vol. 76(2), pages 295-302, July.
    2. Smith, Jeremy & Otero, Jesus, 1997. "Structural breaks and seasonal integration," Economics Letters, Elsevier, vol. 56(1), pages 13-19, September.
    3. Nelson, Charles R & Piger, Jeremy & Zivot, Eric, 2001. "Markov Regime Switching and Unit-Root Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 404-415, October.
    4. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
    5. Franses, Philip Hans & Haldrup, Niels, 1994. "The Effects of Additive Outliers on Tests for Unit Roots and Cointegration," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 471-478, October.
    6. Stephen J. Leybourne And Paul Newbold, 2000. "Behaviour of the standard and symmetric Dickey-Fuller-type tests when there is a break under the null hypothesis," Econometrics Journal, Royal Economic Society, vol. 3(1), pages 1-15.
    7. Taylor, A M Robert, 2000. " The Finite Sample Effects of Deterministic Variables on Conventional Methods of Lag-Selection in Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(2), pages 293-304, May.
    8. Philip Hans Franses & Timothy J. Vogelsang, 1998. "On Seasonal Cycles, Unit Roots, And Mean Shifts," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 231-240, May.
    9. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    10. Uwe Hassler & Paulo M. M. Rodrigues, 2004. "Seasonal Unit Root Tests Under Structural Breaks," Journal of Time Series Analysis, Wiley Blackwell, vol. 25(1), pages 33-53, January.
    11. Balcombe, Kelvin, 1999. " Seasonal Unit Root Tests with Structural Breaks in Deterministic Seasonality," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 569-582, November.
    12. Matei Demetrescu & Uwe Hassler, 2007. "Effect of neglected deterministic seasonality on unit root tests," Statistical Papers, Springer, vol. 48(3), pages 385-402, September.
    13. Leybourne, Stephen J. & C. Mills, Terence & Newbold, Paul, 1998. "Spurious rejections by Dickey-Fuller tests in the presence of a break under the null," Journal of Econometrics, Elsevier, vol. 87(1), pages 191-203, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:manchs:v:76:y:2008:i:5:p:528-538. 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/semanuk.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.