Impacts of the initial observation on unit root tests using recursive demeaning and detrending procedures

The use of recursive demeaning and detrending procedures in unit root tests has been popular in the literature, since they lead to more precise estimation of the persistence parameter and greater power in unit root tests. However, we find that unit root tests using these recursive procedures tend to lose power significantly when the initial value is very large.

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Year of publication:	2013
Authors:	Meng, Ming ; Lee, Hyejin ; Cho, Myeong Hyeon ; Lee, Junsoo
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 120.2013, 2, p. 195-199
Publisher:	Elsevier
Subject:	Initial condition \| Recursive demeaning \| Recursive detrending \| Unit root tests

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Type of publication:	Article
Classification:	C12 - Hypothesis Testing ; C15 - Statistical Simulation Methods; Monte Carlo Methods ; C22 - Time-Series Models
Source:	RePEc - Research Papers in Economics

Persistent link: https://ebvufind01.dmz1.zbw.eu/10010678814