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Construction of Stationarity Tests with Less Size Distortions

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  • Kurozumi, Eiji
  • 黒住, 英司

Abstract

We propose a (trend) stationarity test with a good finite sample size even when a process is (trend) stationary with strong persistence; this is useful for distinguishing between a (trend) stationary process with strong persistence and a unit root process. It could be considered as a modified version of Leybourne and McCabe's test (1994, LMC), but with adi fferent correction method for serial correlation. A Monte Carlo simulation reveals that in terms of empirical size, our test is closer to the nominal one than the original LMC test and is more powerful than the LMC test with size-adjusted critical values.
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Suggested Citation

  • Kurozumi, Eiji & 黒住, 英司, 2005. "Construction of Stationarity Tests with Less Size Distortions," Discussion Papers 2005-12, Graduate School of Economics, Hitotsubashi University.
    • Handle: RePEc:hit:econdp:2005-12
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    References listed on IDEAS

    as
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    Cited by:

    1. Eiji Kurozumi & Shinya Tanaka, 2010. "Reducing the size distortion of the KPSS test," Journal of Time Series Analysis, Wiley Blackwell, vol. 31(6), pages 415-426, November.

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    More about this item

    Keywords

    LM test; stationary; unit root;
    All these keywords.

    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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