The Fragility of the KPSS Stationarity Test
Stationarity tests exhibit extreme size distortions if the observable process is stationary yet highly persistent. In this paper we provide a theoretical explanation for the size distortion of the KPSS test for DGPs with a broad range of first order autocorrelation coefficient. Considering a near-integrated, nearly stationary process we show that the asymptotic distribution of the test contains an additional term, which can potentially explain the amount of size distortion documented in previous simulation studies.
|Date of creation:||Dec 2009|
|Contact details of provider:|| Postal: Via Cantarane, 24 - I-37129 Verona|
Phone: +39 045 802 8095
Fax: +39 045 802 8529
Web page: http://www.dse.univr.it
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Newey, W.K. & West, K.D., 1992.
"Automatic Lag Selection in Covariance Matrix Estimation,"
9220, Wisconsin Madison - Social Systems.
- Whitney K. Newey & Kenneth D. West, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Oxford University Press, vol. 61(4), pages 631-653.
- Kenneth D. West & Whitney K. Newey, 1995. "Automatic Lag Selection in Covariance Matrix Estimation," NBER Technical Working Papers 0144, National Bureau of Economic Research, Inc.
- Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990.
"Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?,"
8905, Michigan State - Econometrics and Economic Theory.
- Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
- Donald W.K. Andrews & Christopher J. Monahan, 1990.
"An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator,"
Cowles Foundation Discussion Papers
942, Cowles Foundation for Research in Economics, Yale University.
- Andrews, Donald W K & Monahan, J Christopher, 1992. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Econometrica, Econometric Society, vol. 60(4), pages 953-966, July.
- Bart Hobijn & Philip Hans Franses & Marius Ooms, 2004. "Generalizations of the KPSS-test for stationarity," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 58(4), pages 483-502.
- Lanne, Markku & Saikkonen, Pentti, 2000.
"Reducing size distortions of parametric stationarity tests,"
SFB 373 Discussion Papers
2000,12, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Markku Lanne & Pentti Saikkonen, 2003. "Reducing size distortions of parametric stationarity tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 24(4), pages 423-439, 07.
- Leybourne, S J & McCabe, B P M, 1994. "A Consistent Test for a Unit Root," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 157-166, April.
- Nunzio Cappuccio & Diego Lubian, 2006. "Local Asymptotic Distributions of Stationarity Tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 27(3), pages 323-345, 05.
When requesting a correction, please mention this item's handle: RePEc:ver:wpaper:67/2009. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael Reiter)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.