Unit Root Testing with Slowly Varying Trends PDF Download
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Author: Sven Otto
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
A unit root test is proposed for time series with a nonparametric trend component using a pooled regression of overlapping blocks. The class of trend functions considered includes any boundedly differentiable trend function with finitely many breaks. Limiting null-distributions of the pseudo t-statistic of the pooled regression are derived under two different block asymptotics. Small-b asymptotics yields a standard normal distribution and under fixed-b asymptotics a functional of Brownian motions is obtained. A nuisance parameter correction provides heteroskedasticity robust tests and serial correlation is accounted for by pre-whitening. For both tests a Monte Carlo study with slowly varying trends yields both good size and improved power results when compared to conventional unit root tests.
Author: Sven Otto
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
A unit root test is proposed for time series with a nonparametric trend component using a pooled regression of overlapping blocks. The class of trend functions considered includes any boundedly differentiable trend function with finitely many breaks. Limiting null-distributions of the pseudo t-statistic of the pooled regression are derived under two different block asymptotics. Small-b asymptotics yields a standard normal distribution and under fixed-b asymptotics a functional of Brownian motions is obtained. A nuisance parameter correction provides heteroskedasticity robust tests and serial correlation is accounted for by pre-whitening. For both tests a Monte Carlo study with slowly varying trends yields both good size and improved power results when compared to conventional unit root tests.
Author: K. Patterson
Publisher: Springer
ISBN: 0230248454
Category : Business & Economics
Languages : en
Pages : 301
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Book Description
This book gives an authoritative overview of the literature on non-stationarity, integration and unit roots, providing direction and guidance. It also provides detailed examples to show how the techniques can be applied in practical situations and the pitfalls to avoid.
Author: G. S. Maddala
Publisher: Cambridge University Press
ISBN: 9780521587822
Category : Business & Economics
Languages : en
Pages : 528
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Book Description
A comprehensive review of unit roots, cointegration and structural change from a best-selling author.
Author: Tae-Hwan Kim
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We analyse the case where a unit-root test is based on a Dickey-Fuller regression the only deterministic term of which is a fixed intercept. Suppose, however, as could well be the case, that the actual data-generating process includes a broken linear trend. It is shown theoretically, and verified empirically, that under the I(1) null and I(0) alternative hypotheses the Dickey-Fuller test can display a wide range of different characteristics depending on the nature and location of the break.
Author: Traoré, Fousseini
Publisher: Intl Food Policy Res Inst
ISBN:
Category : Political Science
Languages : en
Pages : 24
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Book Description
Since the seminal paper by Granger and Newbold (1974) on spurious regressions, applied econometricians have become aware of the consequences of unit roots in empirical analysis with time series data. Yet one can still find many published papers with unit root tests implemented in an inappropriate way. The objective of this Technical Note is to highlight the common pitfalls and best practices when testing for unit roots. In addition to the theoretical discussion, we provide examples using price data from Kenya, Mali, Togo, and South Africa to illustrate the procedures we think are worth following.
Author: Yin-Wong Cheung
Publisher:
ISBN:
Category : Econometrics
Languages : en
Pages : 48
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Book Description
Author: Paramsothy Silvapulle
Publisher:
ISBN:
Category : Monte Carlo method
Languages : en
Pages : 30
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Book Description
Author: Bent Nielsen
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Dickey and Fuller [Econometrica (1981) Vol. 49, pp. 1057-1072] suggested unit-root tests for an autoregressive model with a linear trend conditional on an initial observation. TPower of tests for unit roots in the presence of a linear trend slightly different model with a random initial value in which nuisance parameters can easily be eliminated by an invariant reduction of the model. We show that invariance arguments can also be used when comparing power within a conditional model. In the context of the conditional model, the Dickey-Fuller test is shown to be more stringent than a number of unit-root tests motivated by models with random initial value. The power of the Dickey-Fuller test can be improved by making assumptions to the initial value. The practitioner therefore has to trade-off robustness and power, as assumptions about initial values are hard to test, but can give more power.
Author: Rickard Sandberg
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This work builds a flexible model accommodating nonlinear dynamics around a trend function with multiple (up to) gradual shifts. Such a model is suitable for capturing the behavior of many post World War II economic time-series subject to the onset of external causes such as oil crises, financial crises, technology changes and regulatory changes. Deriving unit root tests in this nonlinear model is of particular interest. In fact, the options of a general trend specification and nonlinear dynamics are critical to remedy unit root tests not being biased toward a non-rejection of a unit root hypothesis and prevents the first-differences of a series from being used too often. An asymptotic theory for the unit root tests is also established. The unit root tests are applied to G7 industrial production series, and evidence in favor of nonlinear trend 'stationary' models is found in a majority of the cases. The merits of the new model are further demonstrated in an estimation exercise for the US industrial production series, and evidence of four gradual shifts in the trend, different growth patterns for different periods, and business cycle asymmetries is found.
Author: K. Patterson
Publisher: Springer
ISBN: 1137003316
Category : Business & Economics
Languages : en
Pages : 586
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Book Description
Testing for a Unit Root is now an essential part of time series analysis but the literature on the topic is so large that knowing where to start is difficult even for the specialist. This book provides a way into the techniques of unit root testing, explaining the pitfalls and nonstandard cases, using practical examples and simulation analysis.
