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Small-Disturbance Asymptotics and the Durbin-Watson and Related Tests in the Dynamic Regression Model

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  • King, Maxwell L.
  • Wu, Ping X.

Abstract

Until recently, it was thought inappropriate to apply the Durbin-Watson (DW) test to a dynamic linear regression model because of the lack of appropriate critical values. Recently, Inder (1986) used a modified small-disturbance distribution (SDD) to find approximate critical values. This paper studies the exact SDD of statistics of the same general form as the DW statistic and suggests some changes to Inder's result. We show how to calculate true small-disturbance critical values and bounds for these critical values that take into account the exogenous regressors. Our results give a'justification for the use of the familiar tables of bounds when the DW test is applied to a dynamic regression model.

Suggested Citation

  • King, Maxwell L. & Wu, Ping X., "undated". "Small-Disturbance Asymptotics and the Durbin-Watson and Related Tests in the Dynamic Regression Model," Department of Econometrics and Business Statistics Working Papers 266984, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:ags:monebs:266984
    DOI: 10.22004/ag.econ.266984
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    1. is not listed on IDEAS
    2. Atukorala, Ranjani & Sriananthakumar, Sivagowry, 2015. "A comparison of the accuracy of asymptotic approximations in the dynamic regression model using Kullback-Leibler information," Economic Modelling, Elsevier, vol. 45(C), pages 169-174.
    3. Sriananthakumar, Sivagowry, 2015. "Approximate Non-Similar critical values based tests vs Maximized Monte Carlo tests," Economic Modelling, Elsevier, vol. 49(C), pages 387-394.
    4. Kulendran, N. & King, Maxwell L., 1997. "Forecasting international quarterly tourist flows using error-correction and time-series models," International Journal of Forecasting, Elsevier, vol. 13(3), pages 319-327, September.
    5. Maxwell L. King & Sivagowry Sriananthakumar, 2015. "Point Optimal Testing: A Survey of the Post 1987 Literature," Monash Econometrics and Business Statistics Working Papers 5/15, Monash University, Department of Econometrics and Business Statistics.
    6. José Romero, 2013. "¿Es posible utilizar el tipo de cambio para hacer más competitiva la economía mexicana?," Serie documentos de trabajo del Centro de Estudios Económicos 2013-10, El Colegio de México, Centro de Estudios Económicos.
    7. Dimitrios Vougas, 2001. "Deterministic exponential heteroskedasticity, a weakly stationary unit-root process and a useful diagnostic test," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 427-430.
    8. Alicia Puyana & Jose Romero, 2012. "Informalidad y dualismo en la economía mexicana," Serie documentos de trabajo del Centro de Estudios Económicos 2012-11, El Colegio de México, Centro de Estudios Económicos.
    9. Phillips, Peter C. B. & Loretan, Mico, 1991. "The Durbin-Watson ratio under infinite-variance errors," Journal of Econometrics, Elsevier, vol. 47(1), pages 85-114, January.
    10. Proïa, Frédéric, 2013. "Further results on the h-test of Durbin for stable autoregressive processes," Journal of Multivariate Analysis, Elsevier, vol. 118(C), pages 77-101.
    11. Jose Romero, 2012. "Inversión extranjera directa y crecimiento económico en México: 1940-2010," Serie documentos de trabajo del Centro de Estudios Económicos 2012-12, El Colegio de México, Centro de Estudios Económicos.

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