Tests for Unit Roots: A Monte Carlo Investigation

G. William Schwert

635 citations0/0 files storedJournal of Business and Economic Statistics

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Abstract

Recent work by Said and Dickey (1984, 1985), Phillips (1987), and Phillips and Perron (1988) examines tests for unit roots in the autoregressive part of mixed autoregressive integrated moving average models (tests for stationary). Monte Carlo experiments show that these unit-root tests have different finite-sample distributions from the unit-root tests developed by Fuller (1976) and Dickey and Fuller (1979, 1981) for autoregressive processes. In particular, the tests developed by Phillips (1987) and Phillips and Perron (in press) seem more sensitive to model misspecification than the high-order autoregressive approximation suggested by Said and Dickey (1984).

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References

1988Testing for a Unit Root in Time Series Regression 1981Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root 2019American Economic Review 1977Time Series Analysis: Forecasting and Control 1984Testing for Unit Roots in Autoregressive-Moving Average Models of Unknown Order 1987Time Series Regression with a Unit Root 1988Testing for Common Trends 1987Effects of model specification on tests for unit roots in macroeconomic data

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