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Unit root testing

  • Wolters, Jürgen
  • Hassler, Uwe

The occurrence of unit roots in economic time series has far reaching consequences for univariate as well as multivariate econometric modelling. Therefore, unit root tests are nowadays the starting point of most empirical time series studies. The oldest and most widely used test is due to Dickey and Fuller (1979). Reviewing this test and variants thereof we focus on the importance of modelling the deterministic component. In particular, we survey the growing literature on tests accounting for structural shifts. Finally, further applied aspects are addressed how to get the size correct and obtain good power at the same time.

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Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2005/23.

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Date of creation: 2005
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Handle: RePEc:zbw:fubsbe:200523
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