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Testing for Unit Roots: What Should Students Be Taught?

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  • John Elder
  • Peter E. Kennedy

Abstract

Unit-root testing strategies are unnecessarily complicated because they do not exploit prior knowledge of the growth status of the time series, they worry about unrealistic outcomes, and they double- or triple-test for unit roots. The authors provide a testing strategy that cuts through these complications and so facilitates teaching this dimension of the unit-root phenomenon. F tests are used as a vehicle for understanding, but t tests are recommended in the end, consistent with common practice.

Suggested Citation

  • John Elder & Peter E. Kennedy, 2001. "Testing for Unit Roots: What Should Students Be Taught?," The Journal of Economic Education, Taylor & Francis Journals, vol. 32(2), pages 137-146, January.
    • Handle: RePEc:taf:jeduce:v:32:y:2001:i:2:p:137-146
    DOI: 10.1080/00220480109595179
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    References listed on IDEAS

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    1. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    2. Peter E. Kennedy & John Elder, 2001. "F versus t tests for unit roots," Economics Bulletin, AccessEcon, vol. 3(3), pages 1-6.
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