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The behaviour of Dickey-Fuller and Phillips-Perron tests under the alternative hypothesis




The two most commonly applied tests of the null hypothesis of a unit autoregres-sive root in a time series generating process are examined. Simple theoretical calculations, confirmed by simulation evidence, suggest that the probabilities of rejection of the null hy-pothesis of those tests can differ substantially when the true generating process is a stationary second-order autoregression.

Suggested Citation

  • Stephen J. Leybourne & Paul Newbold, 1999. "The behaviour of Dickey-Fuller and Phillips-Perron tests under the alternative hypothesis," Econometrics Journal, Royal Economic Society, vol. 2(1), pages 92-106.
  • Handle: RePEc:ect:emjrnl:v:2:y:1999:i:1:p:92-106

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    References listed on IDEAS

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    7. Gary Burtless, 1995. "The Case for Randomized Field Trials in Economic and Policy Research," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 63-84, Spring.
    8. A. Werwatz, 1996. "How firm-specific is German apprenticeship training?," SFB 373 Discussion Papers 1996,12, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    9. Heckman, J.J. & Hotz, V.J., 1988. "Choosing Among Alternative Nonexperimental Methods For Estimating The Impact Of Social Programs: The Case Of Manpower Training," University of Chicago - Economics Research Center 88-12, Chicago - Economics Research Center.
    10. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May.
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    Cited by:

    1. George, Halkos & Ilias, Kevork, 2005. "Το Υπόδειγμα Τυχαίου Περιπάτου Με Αυτοπαλίνδρομα Σφάλματα
      [The random walk model with autoregressive errors]
      ," MPRA Paper 33312, University Library of Munich, Germany.
    2. Nielsen, Morten Ørregaard, 2009. "A Powerful Test Of The Autoregressive Unit Root Hypothesis Based On A Tuning Parameter Free Statistic," Econometric Theory, Cambridge University Press, vol. 25(06), pages 1515-1544, December.
    3. Ringlund, Guro Bornes & Rosendahl, Knut Einar & Skjerpen, Terje, 2008. "Does oilrig activity react to oil price changes An empirical investigation," Energy Economics, Elsevier, vol. 30(2), pages 371-396, March.
    4. Rey, Serge & Varachaud, Pascal, 2000. "Le comportement des taux de change réels européens de la fin Bretton Woods à l’adoption de l’euro
      [The behavior of European real exchange rates from the Bretton Woods system end to the adoption of
      ," MPRA Paper 49502, University Library of Munich, Germany.
    5. Morten Ørregaard Nielsen, 2008. "A Powerful Tuning Parameter Free Test of the Autoregressive Unit Root Hypothesis," Working Papers 1175, Queen's University, Department of Economics.

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    Power comparisons; Unit root tests.;


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