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Improved critical values for the Enders-Granger unit-root test

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  • Walter Enders

Abstract

Enders and Granger provide critical values to test the null hypothesis of a unit-root against the alternative of threshold adjustment. However, in obtaining their critical values, Enders and Granger did not use a consistent estimate of the threshold nor did they use a lag-augmented data generating process. This note remedies both of these problems. The power of the test statistics using the consistent estimate of the threshold are compared to those of Enders-Granger and of Dickey-Fuller. Surprisingly, the original Enders-Granger statistic often has the highest power. As such, the Enders-Granger statistic using a lag-augmented data generating process is calculated.

Suggested Citation

  • Walter Enders, 2001. "Improved critical values for the Enders-Granger unit-root test," Applied Economics Letters, Taylor & Francis Journals, vol. 8(4), pages 257-261.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:4:p:257-261
    DOI: 10.1080/135048501750104033
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    References listed on IDEAS

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    1. Caner,M. & Hansen,B.E., 1998. "Threshold autoregression with a near unit root," Working papers 27, Wisconsin Madison - Social Systems.
    2. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-311, July.
    3. Pippenger, Michael K & Goering, Gregory E, 1993. "A Note on the Empirical Power of Unit Root Tests under Threshold Processes," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(4), pages 473-481, November.
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    Cited by:

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    2. Pawel Milobedzki, 2010. "The Term Structure of the Polish Interbank Rates. A Note on the Symmetry of their Reversion to the Mean," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 10, pages 81-95.
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    4. Atanu Ghoshray, 2008. "Asymmetric price adjustment of Ukrainian feed wheat export prices in relation to U.S. maize exports: A Note," Economics Bulletin, AccessEcon, vol. 17(2), pages 1-8.
    5. Ayşegül Çorakcı & Furkan Emirmahmutoglu & Tolga Omay, 2017. "Re-examining the real interest rate parity hypothesis (RIPH) using panel unit root tests with asymmetry and cross-section dependence," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(1), pages 91-120, February.
    6. Julius Loermann, 2018. "The Impact of CHF/EUR Exchange Rate Uncertainty on Swiss Exports to the Eurozone: Evidence from a Threshold VAR," FIW Working Paper series 189, FIW, revised Feb 2019.
    7. Steven Cook & Neil Manning, 2003. "The power of asymmetric unit root tests under threshold and consistent-threshold estimation," Applied Economics, Taylor & Francis Journals, vol. 35(14), pages 1543-1550.
    8. Bentzen, Jan & Smith, Valdemar, 2005. "Short-run and long-run relationships in the consumption of alcohol in the Scandinavian countries," Nationaløkonomisk tidsskrift, Nationaløkonomisk Forening, vol. 2005(1), pages 65-80.
    9. Easaw, Joshy Z. & Ghoshray, Atanu, 2007. "Confidence or competence: Do presidencies matter for households' subjective preferences?," European Journal of Political Economy, Elsevier, vol. 23(4), pages 1025-1037, December.
    10. Nick, Sebastian & Tischler, Benjamin, 2014. "The Law of one Price in Global Natural Gas Markets - A Threshold Cointegration Analysis," EWI Working Papers 2014-16, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    11. James Payne & Hassan Mohammadi, 2006. "Are Adjustments in the U.S. Budget Deficit Asymmetric? Another Look at Sustainability," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 34(1), pages 15-22, March.
    12. repec:kap:iaecre:v:15:y:2009:i:2:p:143-155 is not listed on IDEAS
    13. Cook, Steven, 2006. "The impact of GARCH on asymmetric unit root tests," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 369(2), pages 745-752.
    14. Atanu Ghoshray, 2009. "On Price Dynamics for Different Qualities of Coffee," Review of Market Integration, India Development Foundation, vol. 1(1), pages 103-118, April.
    15. Luis Gil-Alana, 2009. "Government Expenditures and Revenues: Evidence of Fractional Cointegration in an Asymmetric Modeling," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 15(2), pages 143-155, May.
    16. Chu V. Nguyen, & Muhammad Mahboob Ali, & Alexandru Mircea Nedelea, 2017. "The Behaviors Of Lending, Deposit Rates And Intermediation Premium Of Pakistani Banks With Different Types Of Ownership Structures," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 6(1), pages 1-49, January.
    17. Cook, Steven, 2008. "Joint maximum likelihood estimation of unit root testing equations and GARCH processes: Some finite-sample issues," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 77(1), pages 109-116.
    18. repec:ebl:ecbull:v:17:y:2008:i:2:p:1-8 is not listed on IDEAS
    19. Mohammadi, Hassan, 2009. "Electricity prices and fuel costs: Long-run relations and short-run dynamics," Energy Economics, Elsevier, vol. 31(3), pages 503-509, May.
    20. Atanu Ghoshray & Sushil Mohan, 2021. "Coffee price dynamics: an analysis of the retail-international price margin [Commodity dependence and development: suggestions to tackle the commodities problem]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 48(4), pages 983-1006.
    21. Robert Sollis, 2004. "Asymmetric adjustment and smooth transitions: a combination of some unit root tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 25(3), pages 409-417, May.
    22. Steven Cook, 2003. "The Convergence of Regional House Prices in the UK," Urban Studies, Urban Studies Journal Limited, vol. 40(11), pages 2285-2294, October.

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