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Unit root quantile autoregression testing using covariates

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  • Galvao Jr., Antonio F.

Abstract

This paper extends unit root tests based on quantile regression proposed by Koenker and Xiao [Koenker, R., Xiao, Z., 2004. Unit root quantile autoregression inference, Journal of the American Statistical Association 99, 775-787] to allow stationary covariates and a linear time trend. The limiting distribution of the test is a convex combination of Dickey-Fuller and standard normal distributions, with weight determined by the correlation between the equation error and the regression covariates. A simulation experiment is described, illustrating the finite sample performance of the unit root test for several types of distributions. The test based on quantile autoregression turns out to be especially advantageous when innovations are heavy-tailed. An application to the CPI-based real exchange rates using four different countries suggests that real exchange rates are not constant unit root processes.

Suggested Citation

  • Galvao Jr., Antonio F., 2009. "Unit root quantile autoregression testing using covariates," Journal of Econometrics, Elsevier, vol. 152(2), pages 165-178, October.
  • Handle: RePEc:eee:econom:v:152:y:2009:i:2:p:165-178
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    Cited by:

    1. Cho, Jin Seo & Kim, Tae-hwan & Shin, Yongcheol, 2015. "Quantile cointegration in the autoregressive distributed-lag modeling framework," Journal of Econometrics, Elsevier, vol. 188(1), pages 281-300.
    2. Francis Leni Anguyo & Rangan Gupta & Kevin Kotze, 2017. "Inflation Dynamics in Uganda: A Quantile Regression Approach," School of Economics Macroeconomic Discussion Paper Series 2017-07, School of Economics, University of Cape Town.
    3. Hosseinkouchack, Mehdi & Wolters, Maik H., 2013. "Do large recessions reduce output permanently?," Economics Letters, Elsevier, vol. 121(3), pages 516-519.
    4. Uwe Hassler & Paulo M.M. Rodrigues & Antonio Rubia, 2016. "Quantile Regression for Long Memory Testing: A Case of Realized Volatility," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 14(4), pages 693-724.
    5. Fossati, Sebastian, 2012. "Covariate unit root tests with good size and power," Computational Statistics & Data Analysis, Elsevier, pages 3070-3079.
    6. Sebastian Fossati, 2013. "Unit root testing with stationary covariates and a structural break in the trend function," Journal of Time Series Analysis, Wiley Blackwell, vol. 34(3), pages 368-384, May.
    7. Mohsen Bahmani-Oskooee & Tsangyao Chang & Tsung-Hsien Chen & Han-Wen Tzeng, 2017. "Revisiting purchasing power parity in Eastern European countries: quantile unit root tests," Empirical Economics, Springer, vol. 52(2), pages 463-483, March.
    8. Wolters Maik H. & Tillmann Peter, 2015. "The changing dynamics of US inflation persistence: a quantile regression approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, pages 161-182.
    9. Goodness C. Aye & Tsangyao Chang & Wen-Yi Chen & Rangan Gupta & Mark Wohar, 2016. "Testing the Efficiency of the Art Market using Quantile-Based Unit Root Tests with Sharp and Smooth Breaks," Working Papers 201625, University of Pretoria, Department of Economics.
    10. Lee, Chien-Chiang & Lee, Cheng-Feng & Lee, Chi-Chuan, 2014. "Asymmetric dynamics in REIT prices: Further evidence based on quantile regression analysis," Economic Modelling, Elsevier, vol. 42(C), pages 29-37.
    11. Lee, Cheng-Feng & Hu, Te-Chung & Li, Ping-Cheng & Tsong, Ching-Chuan, 2013. "Asymmetric behavior of unemployment rates: Evidence from the quantile covariate unit root test," Japan and the World Economy, Elsevier, vol. 28(C), pages 72-84.
    12. repec:spr:empeco:v:52:y:2017:i:4:d:10.1007_s00181-016-1114-4 is not listed on IDEAS
    13. Li, Haiqi & Zheng, Chaowen & Guo, Yu, 2016. "Estimation and test for quantile nonlinear cointegrating regression," Economics Letters, Elsevier, vol. 148(C), pages 27-32.
    14. Lijuan Huo & Tae-Hwan Kim & Yunmi Kim, 2013. "Testing for Autocorrelation in Quantile Regression Models," Working papers 2013rwp-54, Yonsei University, Yonsei Economics Research Institute.
    15. Heung Soon Jung & Dong Jin Lee & Tae Hyo Gwon & Se Jin Yun, 2015. "Reference Rates and Monetary Policy Effectiveness in Korea," Working Papers 2015-27, Economic Research Institute, Bank of Korea.

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