A Bayesian Analysis Of The Unit Root Hypothesis Within An Unobserved Components Model
In this paper we extend some of Phillips's  results to nonlinear unobserved components models and develop a posterior odds ratio test of the unit root hypothesis based on flat and Jeffreys priors. In contrast to the analysis presented by Schotman and van Dijk , we utilize a nondegenerate structural representation of the components model that allows us to determine well-behaved Jeffreys priors, posterior densities under flat priors and Jeffreys priors, and posterior odds ratios for the unit root hypothesis without a proper prior for the level parameter. The analysis highlights the importance of the treatment of initial values for inference concerning stationarity and unit roots.
Volume (Year): 10 (1994)
Issue (Month): 3-4 (August)
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