Correcting size distortion of the Dickey-Fuller test via recursive mean adjustment
Leybourne et al. (J. Econom. 87 (1998) 191) have shown the Dickey-Fuller (J. Amer. Statist. Assoc. 74 (1979) 427) unit root test to suffer from severe oversizing in the presence of level breaks. In this paper it is shown that recursive mean adjustment can correct this distortion, even for large breaks.
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Volume (Year): 60 (2002)
Issue (Month): 1 (November)
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- Jushan Bai & Robin L. Lumsdaine & James H. Stock, 1998. "Testing For and Dating Common Breaks in Multivariate Time Series," Review of Economic Studies, Oxford University Press, vol. 65(3), pages 395-432.
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- Perron, P., 1989. "Testing For A Unit Root In A Time Series With A Changing Mean," Papers 347, Princeton, Department of Economics - Econometric Research Program.
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