A Primer on Unit Root Testing

48 Pages Posted: 13 Sep 2012

See all articles by Peter C. B. Phillips

Peter C. B. Phillips

Yale University - Cowles Foundation; University of Auckland; University of Southampton; Singapore Management University - School of Economics

Zhijie Xiao

University of Illinois at Urbana-Champaign - Department of Economics

Date Written: December 1998

Abstract

The immense literature and diversity of unit root tests can at times be confusing even to the specialist and presents a truly daunting prospect to the uninitiated. In consequence, much empirical work still makes use of the simplest testing procedures because it is unclear from the literature and from recent reviews which tests if any are superior. This paper presents a survey of unit root theory with an emphasis on testing principles and recent developments. The general framework adopted makes it possible to consider tests of stochastic trends against trend stationarity and trend breaks of a general type. The main tests are listed, and asymptotic distributions are given in a simple form that emphasizes commonalities in the theory. Some simulation results are reported, and an extensive list of references and all annotated bibliography are provided.

Suggested Citation

Phillips, Peter C. B. and Xiao, Zhijie, A Primer on Unit Root Testing (December 1998). Journal of Economic Surveys, Vol. 12, Issue 5, pp. 423-470, 1998. Available at SSRN: https://ssrn.com/abstract=2145739 or http://dx.doi.org/10.1111/1467-6419.00064

Peter C. B. Phillips (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
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University of Auckland ( email )

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University of Southampton

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Singapore Management University - School of Economics

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Singapore

Zhijie Xiao

University of Illinois at Urbana-Champaign - Department of Economics ( email )

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1407 W. Gregory
Urbana, IL 61801
United States
217-333-4520 (Phone)
217-244-6678 (Fax)

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