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“GLS based unit root tests for bounded processes”

Author

Listed:
  • Josep Lluís Carrion-i-Silvestre

    (Faculty of Economics, University of Barcelona)

  • María Dolores Gadea

    (Department of Applied Economics, University of Zaragoza)

Abstract

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.

Suggested Citation

  • Josep Lluís Carrion-i-Silvestre & María Dolores Gadea, 2013. "“GLS based unit root tests for bounded processes”," AQR Working Papers 201302, University of Barcelona, Regional Quantitative Analysis Group, revised Apr 2013.
    • Handle: RePEc:aqr:wpaper:201302
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    File URL: http://www.ub.edu/irea/working_papers/2013/201304.pdf
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    Cited by:

    1. Calzada, Joan & Martínez-Santos, Fernando, 2014. "Broadband prices in the European Union: Competition and commercial strategies," Information Economics and Policy, Elsevier, vol. 27(C), pages 24-38.
    2. Manuela Alcañiz & Montserrat Guillén & Daniel Sánchez-Moscona & Miguel Santolino & Oscar Llatje & Lluís Ramon, 2013. "Prevalence of alcohol-impaired drivers based on random breath tests in a roadside survey," Working Papers XREAP2013-05, Xarxa de Referència en Economia Aplicada (XREAP), revised Jul 2013.
    3. Josep Lluís Carrion-I-Silvestre & María Dolores Gadea, 2016. "Bounds, Breaks and Unit Root Tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 37(2), pages 165-181, March.
    4. Josep Lluís Carrion-i-Silvestre & María Dolores Gadea, 2021. ""Detecting multiple level shifts in bounded time series"," IREA Working Papers 202115, University of Barcelona, Research Institute of Applied Economics, revised Jul 2021.
    5. Alanya-Beltran, Willy, 2022. "Unit roots in lower-bounded series with outliers," Economic Modelling, Elsevier, vol. 115(C).
    6. Georgios Mavropoulos & Theodore Panagiotidis, 2020. "Why Young Adults Retreat from Marriage? An Easterlin Relative Income Approach," Discussion Paper Series 2020_01, Department of Economics, University of Macedonia, revised Jan 2020.

    More about this item

    Keywords

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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