Modified KPSS Tests for Near Integration

7 Pages Posted: 10 Oct 2006

See all articles by David Harris

David Harris

University of Melbourne - Department of Economics

Stephen J. Leybourne

University of Nottingham

Brendan P.M. McCabe

University of Liverpool - Management School (ULMS)

Date Written: January 30, 2006

Abstract

This note suggests a simple modification to the Kwiatkowski et al. (1994, KPSS) test so that it is applicable to testing the null hypothesis of near integration against a unit root alternative. The modified KPSS test is shown not to suffer from the asymptotic size distortion problems of the original KPSS test that are described by Müller (2005). The test also has good asymptotic and finite sample properties relative to the point optimal tests of Müller (2005) and Elliott and Müller (2005).

Keywords: Unit root test, stationarity test, near integration

JEL Classification: C22

Suggested Citation

Harris, David and Leybourne, Stephen J. and McCabe, Brendan P.M., Modified KPSS Tests for Near Integration (January 30, 2006). Available at SSRN: https://ssrn.com/abstract=936268 or http://dx.doi.org/10.2139/ssrn.936268

David Harris (Contact Author)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

Stephen J. Leybourne

University of Nottingham ( email )

University Park
School of Economics
Nottingham NG7 2RD
United Kingdom
+44 (0)115 9515478 (Phone)
+44 (0)115 951 4159 (Fax)

Brendan P.M. McCabe

University of Liverpool - Management School (ULMS) ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom

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