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Robust Inference on Seasonal Unit Roots via a Bootstrap Applied to OECD Macroeconomic Series

  • Burridge, P.
  • Gjorstrup, F.
  • Robert Taylor, A. M.

Recent experimental results presented in Burridge and Taylor (2001a,b, and 2003) show that, as usually implemented, the Hylleberg et al. (1990) seasonal unit root tests can be rather liberal, with true level often substantially higher than nominal level. This effect is due to the presence of any of three things: data-based lag selection in the implementation of the tests, and either or both periodic heteroscedasticity and serial correlation in the driving shocks. Burridge and Taylor (2003) demonstrate that under experimental conditions a carefully implemented bootstrap substantially corrects test level without loss of power. The present study applies their technique to a large number of publicly available series, and demonstrates conclusively that the bootstrap produces less liberal, and, given the experimental results cited above, more reliable inference. We report results for Sweden, the UK and the US, which are typical of the fifteen countries in our panel. Other results, the GAUSS code, and raw data are all available at: www.staff.city.ac.uk/p.burridge/

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Paper provided by Department of Economics, City University London in its series Working Papers with number 04/08.

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Date of creation: 2004
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Handle: RePEc:cty:dpaper:04/08
Contact details of provider: Postal: Department of Economics, Social Sciences Building, City University London, Whiskin Street, London, EC1R 0JD, United Kingdom,
Phone: +44 (0)20 7040 8500
Web page: http://www.city.ac.uk

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  1. Hyllerberg, S. & Engle, R.F. & Granger, C.W.J. & Yoo, B.S., 1988. "Seasonal Integration And Cointegration," Papers 0-88-2, Pennsylvania State - Department of Economics.
  2. Burridge, Peter & Robert Taylor, A. M., 2004. "Bootstrapping the HEGY seasonal unit root tests," Journal of Econometrics, Elsevier, vol. 123(1), pages 67-87, November.
  3. Burridge, P. & Taylor, A.M.R., 1999. "On Regression-Based Tests for Seasonal Unit Roots in the Presence of Periodic Heteroscedasticity," Discussion Papers 99-10, Department of Economics, University of Birmingham.
  4. Joseph Beaulieu, J. & Miron, Jeffrey A., 1993. "Seasonal unit roots in aggregate U.S. data," Journal of Econometrics, Elsevier, vol. 55(1-2), pages 305-328.
  5. Smith, Richard J. & Taylor, A. M. Robert, 1998. "Additional critical values and asymptotic representations for seasonal unit root tests," Journal of Econometrics, Elsevier, vol. 85(2), pages 269-288, August.
  6. Horowitz, Joel L. & Savin, N. E., 2000. "Empirically relevant critical values for hypothesis tests: A bootstrap approach," Journal of Econometrics, Elsevier, vol. 95(2), pages 375-389, April.
  7. Murray, Christian J. & Nelson, Charles R., 2000. "The uncertain trend in U.S. GDP," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 79-95, August.
  8. Taylor, A. M. Robert, 1997. "On the practical problems of computing seasonal unit root tests," International Journal of Forecasting, Elsevier, vol. 13(3), pages 307-318, September.
  9. Burridge, Peter & Taylor, A M Robert, 2001. "On the Properties of Regression-Based Tests for Seasonal Unit Roots in the Presence of Higher-Order Serial Correlation," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(3), pages 374-79, July.
  10. Rodrigues, Paulo M. M. & Taylor, A. M. Robert, 2004. "Alternative estimators and unit root tests for seasonal autoregressive processes," Journal of Econometrics, Elsevier, vol. 120(1), pages 35-73, May.
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