Testing for a Unit Root in the Presence of Deterministic Trends
This paper provides a new unit root test based on an alternative parameterization which has previously been considered by Bhargava (1986). This parameterization allows for trend under both the null and the alternative, without introducing any parameters that are irrelevant under either. This is not so in the Dickey-Fuller parameterizations. The new test is extracted from the score or LM principle under the assumption that the errors are iid N(0, sigma squared (epsilon)), but our asymptotics hold under more general assumptions about the errors. Two forms of the test (a coefficient test and at t-test) are derived.
|Date of creation:||Oct 1989|
|Publication status:||Published in Oxford Bulletin of Economics and Statistics (1992), 54(3): 257-287|
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References listed on IDEAS
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- Schmidt, P., 1988. "Dickey-Fuller Tests With Drift," Papers 8717, Michigan State - Econometrics and Economic Theory.
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Cowles Foundation Discussion Papers
740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
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- DeJong, David N, et al, 1992. "Integration versus Trend Stationarity in Time Series," Econometrica, Econometric Society, vol. 60(2), pages 423-433, March.
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"Asymptotic Properties of Residual Based Tests for Cointegration,"
Cowles Foundation Discussion Papers
847R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1988.
- Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-193, January.
- Phillips, P.C.B., 1986.
"Testing for a Unit Root in Time Series Regression,"
Cahiers de recherche
8633, Universite de Montreal, Departement de sciences economiques.
- Andrews, Donald W K, 1991.
"Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation,"
Econometric Society, vol. 59(3), pages 817-858, May.
- Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
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