Performance of seasonal unit root tests for monthly data

1999-12-01articleJournal of Applied Statistics45 citationsclosed

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Monetary Policy and Economic Impact Forecasting Techniques and Applications Diverse Scientific and Economic Studies

Abstract

This paper uses Monte Carlo simulations to analyze the performance of several seasonal unit root tests for monthly time series. The tests are those of Dickey, Hasza and Fuller (DHF), Hylleberg, Engle, Granger and Yoo (HEGY), and Osborn, Chui, Smith and Birchenhall (OCSB). The unit root test of Dickey and Fuller (DF) is also considered. The results indicate that users have to be particularly cautious when applying the monthly version of the HEGY test. In general, the DHF and OCSB tests are preferable in terms of size and power, but these procedures may impose invalid restrictions. An empirical illustration is undertaken for UK two-digit industrial production indicators.

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Cited by

2002ASYMPTOTIC DISTRIBUTIONS OF SEASONAL UNIT ROOT TESTS: A UNIFYING APPROACH