Local Power Functions of Tests for Double Unit Roots
Aarhus University, School of Economics and Management; CREATES
Peter M. Lildholdt
Bank of England - Monetary Analysis
UCSD Economics Discussion Paper No. 2000-12
The purpose of this paper is to characterize three commonly used double unit root tests in terms of their asymptotic local power. To this end, we study a class of nearly doubly integrated processes which in the limit will behave as a weighted integral of a double indexed Ornstein-Uhlenbeck process. Based on a numerical examination of the analytical distributions, a comparison of the tests is made via their asymptotic local power functions.
Number of Pages in PDF File: 33
Keywords: Asymptotic Local Power Function, Brownian Motion, Ornstein-Uhlenbeck Process
JEL Classification: C12, C14, C22working papers series
Date posted: December 1, 2000
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