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Title:Reducing size distortions of parametric stationarity tests PDF Logo
Authors:Lanne, Markku
Saikkonen, Pentti
Issue Date:2000
Series/Report no.:Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2000,12
Abstract:The use of asymptotic critical values in stationarity tests against the alternative of a unit rot process is known to lead to overrejections in finite samples when the considered process is stationary but highly persistent. We claim that in recent parametric tests this is caused by estimation errors which result when the autoregressive parameters used to describe the short-run dynamics of the process are replaced by estimators. We suggest a modification that corrects for these errors and show by simulation that the modified test works reasonably well whenn the persistence is moderate and there is no time trend in the model. An empirical illustration withinflation rate data is provided.
Subjects:stationarity test
inflation rate
Persistent Identifier of the first edition:urn:nbn:de:kobv:11-10047169
Document Type:Working Paper
Appears in Collections:Discussion Papers, SFB 373, HU Berlin

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