@article { , title = {The impact of the initial condition on covariate augmented unit root tests}, abstract = {We examine the behaviour of OLS-demeaned/detrended and GLS-demeaned/detrended unit root tests that employ stationary covariates, as proposed by Hansen (1995, “Rethinking the Univariate Approach to Unit Root Testing.” Econometric Theory 11:1148–71) and Elliott and Jansson (2003, “Testing for Unit Roots with Stationary Covariates.” Journal of Econometrics 115:75–89), respectively, in situations where the magnitude of the initial condition of the time series under consideration may be non-negligible. We show that the asymptotic power of such tests is very sensitive to the initial condition; OLS- and GLS-based tests achieve relatively high power for large and small magnitudes of the initial condition, respectively. Combining information from both types of test via a simple union of rejections strategy is shown to effectively capture the higher power available across all initial condition magnitudes.}, doi = {10.1515/jtse-2015-0013}, eissn = {1941-1928}, issn = {1941-1928}, issue = {1}, journal = {Journal of Time Series Econometrics}, publicationstatus = {Published}, publisher = {De Gruyter}, url = {https://nottingham-repository.worktribe.com/output/779099}, volume = {9}, keyword = {Unit root tests, stationary covariates, initial condition uncertainty, asymptotic power}, year = {2016}, author = {Aristidou, Chrystalleni and Harvey, David I. and Leybourne, Stephen J.} }