Tapered Block Bootstrap for Unit Root Testing

A new bootstrap procedure for unit root testing based on the tapered block bootstrap is introduced. This procedure is similar to previous tests that were based on the block bootstrap and stationary bootstrap, but it has the advantage of the tapering procedure that has been previously shown to reduce the bias of the variance estimator by an order of magnitude. In this paper, the procedure is defined including a specific data-driven method for choosing the block size. Both theoretical results for the asymptotic behavior of the test and simulations that address the small-sample properties and are used for comparison to other methods are given.