On Robust Trend Function Hypothesis Testing
In this paper we build upon the robust procedures proposed in Vogelsang (1998) for testing hypotheses concerning the deterministic trend function of a univariate time series. Vogelsang proposes statistics formed from taking the product of a (normalised) Wald statistic for the trend function hypothesis under test with a specific function of a separate variable addition Wald statistic. The function of the second statistic is explicitly chosen such that the resultant product statistic has pivotal limiting null distributions, coincident at a chosen level, under I(0) or I(1) errors. The variable addition statistic in question has also been suggested as a unit root statistic, and we propose corresponding tests based on other well-known unit root statistics. We find that, in the case of the linear trend model, a test formed using the familiar augmented Dickey-Fuller [ADF] statistic provides a useful complement to Vogelsang's original tests, demonstrating generally superior power when the errors display strong serial correlation with this pattern tending to reverse as the degree of serial correlation in the errors lessens. Importantly for practical considerations, the ADF-based tests also display significantly less finite sample over-size in the presence of weakly dependent errors than the original tests.
If you experience problems downloading a file, check if you have the proper application to view it first. 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 10 (2006)
Issue (Month): 1 (March)
|Contact details of provider:|| Web page: https://www.degruyter.com|
|Order Information:||Web: https://www.degruyter.com/view/j/snde|
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.:
- Serena Ng & Pierre Perron, 2001.
"LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power,"
Econometric Society, vol. 69(6), pages 1519-1554, November.
- Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
- Eugene Canjels & Mark W. Watson, 1997. "Estimating Deterministic Trends In The Presence Of Serially Correlated Errors," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 184-200, May.
- Eugene Canjels & Mark W. Watson, 1994. "Estimating Deterministic Trends in the Presence of Serially Correlated Errors," NBER Technical Working Papers 0165, National Bureau of Economic Research, Inc.
- Eugene Canjels & Mark W. Watson, 1994. "Estimating deterministic trends in the presence of serially correlated errors," Working Paper Series, Macroeconomic Issues 94-19, Federal Reserve Bank of Chicago.
- Bunzel, Helle & Vogelsang, Timothy J., 2005. "Powerful Trend Function Tests That Are Robust to Strong Serial Correlation, With an Application to the Prebisch-Singer Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 381-394, October.
- Bunzel, Helle & Vogelsang, Timothy J., 2003. "Powerful Trend Function Tests That Are Robust to Strong Serial Correlation with an Application to the Prebisch-Singer Hypothesis," Staff General Research Papers Archive 10353, Iowa State University, Department of Economics.
- Helle Bunzel & Timothy Vogelsang, 2003. "Powerful Trend Function Tests That are Robust to Strong Serial Correlation with an Application to the Prebisch Singer Hypothesis," Econometrics 0304002, EconWPA.
- Ayat, Leila & Burridge, Peter, 2000. "Unit root tests in the presence of uncertainty about the non-stochastic trend," Journal of Econometrics, Elsevier, vol. 95(1), pages 71-96, March.
- Ayat, L. & Burridge, P., 1996. "Unit Root Tests in the presence of Uncertainty about the Non-Stochastic Trends," Discussion Papers 96-28, Department of Economics, University of Birmingham.
- Durlauf, Steven N & Phillips, Peter C B, 1988. "Trends versus Random Walks in Time Series Analysis," Econometrica, Econometric Society, vol. 56(6), pages 1333-1354, November.
- Steven N. Durlauf & Peter C.B. Phillips, 1986. "Trends Versus Random Walks in Time Series Analysis," Cowles Foundation Discussion Papers 788, Cowles Foundation for Research in Economics, Yale University.
- Timothy J. Vogelsang, 1998. "Trend Function Hypothesis Testing in the Presence of Serial Correlation," Econometrica, Econometric Society, vol. 66(1), pages 123-148, January.
- Breitung, Jorg, 2002. "Nonparametric tests for unit roots and cointegration," Journal of Econometrics, Elsevier, vol. 108(2), pages 343-363, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:bpj:sndecm:v:10:y:2006:i:1:n:1. 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: (Peter Golla)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.