Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67429
Authors: 
Ahking, Francis W.
Year of Publication: 
2009
Citation: 
[Journal:] The Open Economics Journal [ISSN:] 1874-9194 [Publisher:] Bentham Open [Place:] Sharjah [Volume:] 2 [Year:] 2009 [Pages:] 71-79
Abstract: 
Some researchers, for example, Koop [1], and Sims [2], have advocated for Bayesian alternatives to unit-root testing over the classical approach using the augmented Dickey-Fuller test (ADF). This paper studies the power of what Koop [1] has called the Objective” Bayesian approach to unit-root testing. Koop's objective Bayesian test is interesting in light of the call by Phillips [3, 4] for more objective Bayesian analysis of time series. We apply the objective Bayesian unit-root test to a study of long-run purchasing power parity (PPP) in the post-Bretton Woods era and also Monte Carlo simulations. Overall, contrary to the favorable simulation results obtained by Koop [1], our results suggest that the objective” Bayesian test is biased in favor of trend-stationarity. We conclude that, at least for the objective Bayesian test, it is not better than the classical ADF approach in unit-root tests, and because of its bias, the objective priors suggested by Koop [1] is not appropriate, and we do not recommend its use.
Subjects: 
unit-root test
objective bayesian test
long-run PPP
JEL: 
C11
C22
F31
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.