Testing for near I(2) trends when the signal to noise ratio is small

Researchers seldom find evidence of I(2) in exchange rates, prices, and other macroeconomics time series when they test the order of integration using univariate Dickey-Fuller tests. In contrast, when using the multivariate ML trace test we frequently find double unit roots in the data. Our paper demonstrates by simulations that this often happens when the signal-to-noise-ratio is small.

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Year of publication:	2014
Authors:	Juselius, Katarina
Publisher:	Kiel : Kiel Institute for the World Economy (IfW)
Subject:	univariate and multivariate unit root tests \| double unit roots \| near I(2)

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Series:	Economics Discussion Papers ; 2014-8
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	778287726 [GVK] hdl:10419/92417 [Handle] RePEc:zbw:ifwedp:20148 [RePEc]
Classification:	C1 - Econometric and Statistical Methods: General ; c18 ; C22 - Time-Series Models ; C32 - Time-Series Models ; C52 - Model Evaluation and Testing
Source:	EconStor

Persistent link: https://www.econbiz.de/10010332060