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On The Asymptotics Of Adf Tests For Unit Roots

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  • Yoosoon Chang
  • Joon Park

Abstract

In this paper, we derive the asymptotic distributions of Augmented-Dickey-Fuller (ADF) tests under very mild conditions. The tests were originally proposed and investigated by Said and Dickey (1984) for testing unit roots in finite-order ARMA models with i.i.d. innovations, and are based on a finite AR process of order increasing with the sample size. Our conditions are significantly weaker than theirs. In particular, we allow for general linear processes with martingale difference innovations, possibly having conditional heteroskedasticities. The linear processes driven by ARCH type innovations are thus permitted. The range for the permissible increasing rates for the AR approximation order is also much wider. For the usual t-type test, we only require that it increase at order o(n1/2) while they assume that it is of order o(nκ) for some κ satisfying 0 < κ ≤ 1/3.

Suggested Citation

  • Yoosoon Chang & Joon Park, 2002. "On The Asymptotics Of Adf Tests For Unit Roots," Econometric Reviews, Taylor & Francis Journals, vol. 21(4), pages 431-447.
  • Handle: RePEc:taf:emetrv:v:21:y:2002:i:4:p:431-447 DOI: 10.1081/ETC-120015385
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    References listed on IDEAS

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    1. Peter C.B. Phillips & Pierre Perron, 1986. "Testing for a Unit Root in Time Series Regression," Cowles Foundation Discussion Papers 795R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
    2. Ng, S. & Perron, P., 1994. "Unit Root Tests ARMA Models with Data Dependent Methods for the Selection of the Truncation Lag," Cahiers de recherche 9423, Universite de Montreal, Departement de sciences economiques.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, pages 277-301.
    5. Peter C.B. Phillips & Victor Solo, 1989. "Asymptotics for Linear Processes," Cowles Foundation Discussion Papers 932, Cowles Foundation for Research in Economics, Yale University.
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