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The KPSS Test with Outliers

  • Otero, Jesus

    (Facultad de Economía, Universidad del Rosario)

  • Smith, Jeremy

    (Department of Economics, University of Warwick)

We investigate the effects of outliers on the KPSS tests. We find that for nonstationary series outliers induce spurious stationarity by lowering the power of these tests. The empirical size of these tests is also found to be sensitive to the location of the outlier.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp690.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 690.

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Length: 10 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:wrk:warwec:690
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Web page: http://www2.warwick.ac.uk/fac/soc/economics/

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  1. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
  2. 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.
  3. Van Dijk, Dick & Franses, Philip Hans & Lucas, Andre, 1999. "Testing for Smooth Transition Nonlinearity in the Presence of Outliers," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 217-35, April.
  4. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  5. Franses, Philip Hans & Haldrup, Niels, 1994. "The Effects of Additive Outliers on Tests for Unit Roots and Cointegration," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 471-78, October.
  6. Mei-Yuan Chen, 2002. "Testing stationarity against unit roots and structural changes," Applied Economics Letters, Taylor & Francis Journals, vol. 9(7), pages 459-464.
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