DAVID HARVEY dave.harvey@nottingham.ac.uk
Professor of Econometrics
Asymptotic behaviour of tests for a unit root against an explosive alternative
Harvey, David I.; Leybourne, Stephen J.
Authors
STEVE LEYBOURNE steve.leybourne@nottingham.ac.uk
Professor of Econometrics
Abstract
We compare the asymptotic local power of upper-tail unit root tests against an explosive alternative based on ordinary least squares (OLS) and quasi-differenced (QD) demeaning/detrending. We find that under an asymptotically negligible initialisation, the QD-based tests are near asymptotically efficient and generally offer superior power to OLS-based approaches; however, the power gains are much more modest than in the lower-tail testing context. We also find that asymptotically non-negligible initial conditions do not affect the power ranking in the same way as they do for lower-tail tests, with the QD-based tests retaining a power advantage in such cases.
Citation
Harvey, D. I., & Leybourne, S. J. (2014). Asymptotic behaviour of tests for a unit root against an explosive alternative. Economics Letters, 122(1), https://doi.org/10.1016/j.econlet.2013.11.006
Journal Article Type | Article |
---|---|
Publication Date | Jan 1, 2014 |
Deposit Date | Apr 6, 2016 |
Publicly Available Date | Apr 6, 2016 |
Journal | Economics Letters |
Print ISSN | 0165-1765 |
Electronic ISSN | 0165-1765 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 122 |
Issue | 1 |
DOI | https://doi.org/10.1016/j.econlet.2013.11.006 |
Keywords | Unit root testing; Explosive autoregression; Asymptotic power; Initial condition |
Public URL | https://nottingham-repository.worktribe.com/output/997430 |
Publisher URL | http://www.sciencedirect.com/science/article/pii/S016517651300493X |
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Copyright Statement
Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0
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