A Simple Unit Root Test For Near-I(2) Time Series

34 Pages Posted: 4 Oct 2019 Last revised: 30 Apr 2020

See all articles by Lealand Morin

Lealand Morin

University of Central Florida

Michael Tseng

University of Central Florida

Date Written: September 20, 2019

Abstract

We consider the problem of testing for unit root in time series where the error term of the series is near unit root. As the error term approaches unit root, existing tests no longer retain reasonable small sample properties. We introduce a test statistic that is well-behaved in small sample under such condition. Empirical applications reject the unit root null hypothesis for macroeconomic series, such as unemployment and consumer prices, where conventional unit root tests have been unable to do so.

Keywords: Unit Root, Near Double-Integrated

JEL Classification: C10, C22

Suggested Citation

Morin, Lealand and Tseng, Michael, A Simple Unit Root Test For Near-I(2) Time Series (September 20, 2019). Available at SSRN: https://ssrn.com/abstract=3457017 or http://dx.doi.org/10.2139/ssrn.3457017

Lealand Morin

University of Central Florida ( email )

4000 Central Florida Blvd
Orlando, FL 32816-1400
United States

Michael Tseng (Contact Author)

University of Central Florida ( email )

4000 Central Florida Blvd
Orlando, FL 32816-1400
United States

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