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Simple unit root testing in generally trending data with an application to precious metal prices in Asia

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  • Westerlund, Joakim

Abstract

This paper proposes a new unit root test that is general enough to accommodate a potentially non-linear deterministic trend function, making it one of the most general tests around. However, the main advantage lies with its simple implementation. In particular, the asymptotic critical values are shown to be “almost” independent of the deterministic trend function, and as a result the test can be implemented without the need for model-specific critical values. The new test is applied to a sample consisting of monthly prices of four precious metals for a number of Asian countries.

Suggested Citation

  • Westerlund, Joakim, 2013. "Simple unit root testing in generally trending data with an application to precious metal prices in Asia," Journal of Asian Economics, Elsevier, vol. 28(C), pages 12-27.
  • Handle: RePEc:eee:asieco:v:28:y:2013:i:c:p:12-27
    DOI: 10.1016/j.asieco.2013.04.004
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    References listed on IDEAS

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    1. Narayan, Paresh Kumar & Liu, Ruipeng, 2011. "Are shocks to commodity prices persistent?," Applied Energy, Elsevier, vol. 88(1), pages 409-416, January.
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    5. Elliott, Graham, 1999. "Efficient Tests for a Unit Root When the Initial Observation Is Drawn from Its Unconditional Distribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 767-783, August.
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    More about this item

    Keywords

    Unit root test; Deterministic trend; Recursive detrending;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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