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GLS-based unit root tests for bounded processes

  • Carrion-i-Silvestre, Josep Lluís
  • Gadea, María Dolores

We show that the use of generalized least squares (GLS-)detrending procedures with bound-specific non-centrality parameter leads to important empirical power gains compared to using the ordinary least squares (OLS-)detrending method when testing the null hypothesis of unit root for bounded processes.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176513001870
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 120 (2013)
Issue (Month): 2 ()
Pages: 184-187

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Handle: RePEc:eee:ecolet:v:120:y:2013:i:2:p:184-187
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  2. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
  3. Schmidt, Peter & Phillips, C B Peter, 1992. "LM Tests for a Unit Root in the Presence of Deterministic Trends," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 257-87, August.
  4. Newey, Whitney K & West, Kenneth D, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 631-53, October.
  5. PERRON, Pierre & RODRIGUEZ, Gabriel, 1998. "GLS Detrending, Efficient Unit Root Tests and Structural Change," Cahiers de recherche 9809, Universite de Montreal, Departement de sciences economiques.
  6. Perron, Pierre & Qu, Zhongjun, 2007. "A simple modification to improve the finite sample properties of Ng and Perron's unit root tests," Economics Letters, Elsevier, vol. 94(1), pages 12-19, January.
  7. Cavaliere, Giuseppe & Xu, Fang, 2014. "Testing for unit roots in bounded time series," Journal of Econometrics, Elsevier, vol. 178(P2), pages 259-272.
  8. Giuseppe Cavaliere, 2003. "Limited time series with a unit root," Quaderni di Dipartimento 1, Department of Statistics, University of Bologna.
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