Unit Root Testing Via the Continuous-Path Block Bootstrap

UCSD Economics Discussion Paper No. 2001-06

Posted: 16 Jul 2001

See all articles by Efstathios Paparoditis

Efstathios Paparoditis

University of Cyprus - Department of Mathematics and Statistics

Dimitris N. Politis

University of California, San Diego (UCSD) - Department of Mathematics

Date Written: March 2001

Abstract

A new resampling procedure, the continuous-path block bootstrap, is proposed in the context of testing for integrated (unit root) time series. The continuous-path block bootstrap (CBB) is a nonparametric procedure that successfully generates unit root integrated pseudo time series retaining the important characteristics of the data, e.g., the dependence structure of the stationary process driving the random walk. As a consequence, the CBB can accurately capture the distribution of many unit root test statistics. Large sample theory for the new bootstrap methodology is developed and the asymptotic validity of CBB-based unit root testing is shown via a bootstrap functional limit theorem. Applications of the new procedure to least squares and Dickey-Fuller type test statistics of the unit root hypothesis are given. Finite-sample simulations confirm a good alpha-level accuracy and an increased power associated with CBB-based unit root testing.

Keywords: Block-Bootstrap, Integrated Series, Resampling, Nonstationary Data

JEL Classification: JEL: C12, C14, C15, C22

Suggested Citation

Paparoditis, Efstathios and Politis, Dimitris, Unit Root Testing Via the Continuous-Path Block Bootstrap (March 2001). UCSD Economics Discussion Paper No. 2001-06, Available at SSRN: https://ssrn.com/abstract=266523

Efstathios Paparoditis

University of Cyprus - Department of Mathematics and Statistics ( email )

P.O. Box 20537
1678 Nicosia
Cyprus
00357-2-338701 (Phone)
00357-2-339061 (Fax)

Dimitris Politis (Contact Author)

University of California, San Diego (UCSD) - Department of Mathematics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0112
United States
858-534-5861 (Phone)
858-534-5273 (Fax)

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