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Unit Root Testing with Slowly Varying Trends

Sven Otto

arXiv 9 Mar 2020 · Econometrics · publishedJournal of Time Series Analysis (2020) · 5 citations (OpenAlex)

arXiv:2003.04066 · PDF · DOI · OpenAlex · Extracted main text

Abstract

A unit root test is proposed for time series with a general nonlinear deterministic trend component. It is shown that asymptotically the pooled OLS estimator of overlapping blocks filters out any trend component that satisfies some Lipschitz condition. Under both fixed-$b$ and small-$b$ block asymptotics, the limiting distribution of the t-statistic for the unit root hypothesis is derived. Nuisance parameter corrections provide heteroskedasticity-robust tests, and serial correlation is accounted for by pre-whitening. A Monte Carlo study that considers slowly varying trends yields both good size and improved power results for the proposed tests when compared to conventional unit root tests.

Citation extraction

43
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57
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Most heavily cited references

The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.

ReferenceIntensityMentionsSectionsMain text
1Said, S. E. and Dickey, D. A (1984) Testing for unit roots in autoregressive-moving average models of unknown order0.84333100%
2Enders, W. and Lee, J (2012) A unit root test using a fourier series to approximate smooth breaks0.81142100%
3Cavaliere, G (2005) Unit root tests under time-varying variances0.7374350%
4Elliott, G., Rothenberg, T. J., and Stock, J. H (1996) Efficient tests for an autoregressive unit root0.73732100%
5Schmidt, P. and Phillips, P. C (1992) Lm tests for a unit root in the presence of deterministic trends0.64422100%
6Chang, Y. and Park, J. Y (2002) On the asymptotics of adf tests for unit roots0.5112250%
7Bierens, H. J (1997) Testing the unit root with drift hypothesis against nonlinear trend stationarity, with an application to the us price level and…0.51121100%
8Cavaliere, G. and Taylor, A. R (2007) Testing for unit roots in time series models with non-stationary volatility0.51121100%
9Banerjee, A., Lumsdaine, R. L., and Stock, J. H (1992) Recursive and sequential tests of the unit-root and trend-break hypotheses: theory and international evidence0.40511100%
10Beare, B. K (2018) Unit root testing with unstable volatility0.40511100%

Showing the top 10 of 43 scored citations.