“GLS based unit root tests for bounded processes”
We show that the use of generalized least squares (GLS) detrending procedures leads to important empirical power gains compared to ordinary least squares (OLS) detrend- ing method when testing the null hypothesis of unit root for bounded processes. The non-centrality parameter that is used in the GLS-detrending depends on the bounds, so that improvements on the statistical inference are to be expected if a case-specific parameter is used. This initial hypothesis is supported by the simulation experiment that has been conducted.
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|Date of revision:||Apr 2013|
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- PERRON, Pierre & RODRIGUEZ, Gabriel, 1998.
"GLS Detrending, Efficient Unit Root Tests and Structural Change,"
Cahiers de recherche
9809, Universite de Montreal, Departement de sciences economiques.
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- Giuseppe Cavaliere, 2003.
"Limited time series with a unit root,"
Quaderni di Dipartimento
1, Department of Statistics, University of Bologna.
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0130, National Bureau of Economic Research, Inc.
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0144, National Bureau of Economic Research, Inc.
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- Newey, W.K. & West, K.D., 1992. "Automatic Lag Selection in Covariance Matrix Estimation," Working papers 9220, Wisconsin Madison - Social Systems.
- Serena Ng & Pierre Perron, 2001.
"LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power,"
Econometric Society, vol. 69(6), pages 1519-1554, November.
- Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
- Cavaliere, Giuseppe & Xu, Fang, 2014. "Testing for unit roots in bounded time series," Journal of Econometrics, Elsevier, vol. 178(P2), pages 259-272.
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- Perron, Pierre & Qu, Zhongjun, 2007.
"A simple modification to improve the finite sample properties of Ng and Perron's unit root tests,"
Elsevier, vol. 94(1), pages 12-19, January.
- Pierre Perron & Zhongjun Qu, 2006. "A Simple Modification to Improve the Finite Sample Properties of Ng and Perron’s Unit Root Tests," Boston University - Department of Economics - Working Papers Series WP2006-010, Boston University - Department of Economics.
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