This chapter examines the problems of dealing with trending type data when there is uncertainty over whether or not we really have unit roots in the data. This uncertainty is practical - for many macroeconomic and financial variables theory does not imply a unit root in the data however unit...

We derive the family of tests for a unit root with maximal power against a point alternative when an arbitrary number of stationary covariates are modeled with the potentially integrated series. We show that very large power gains are available when such covariates available. We then derive...

We derive the family of tests for a unit root with maximal power against a point alternative when an arbitrary number of stationary covariates are modeled with the potentially integrated series. We show that very large power gains are available when such covariates are available. We then derive...

Theory often specifies a particular cointegrating vector amongst integrated variables and it is often required that one test for a unit root in the known cointegrating vector. It is common to simply employ a univariate test for a unit root, but this does not take into account all available...

We derive the family of tests for a unit root with maximal power against a point alternative when an arbitrary number of stationary covariates are modeled with the potentially integrated series. We show that very large power gains are available when such covariates are available. We then derive...

In situations where theory specifies a potential cointegrating vector amongst integrated variables, it is often required that one test for a unit root in the constructed cointegrating vector. Although it is common to simply employ a univariate test for a unit root for this test, it is known that...

A structural break is viewed as a permanent change in the parameter vector of a model. Using taxonomies of all sources of forecast errors for both conditional mean and conditional variance processes, we consider the impacts of breaks and their relevance in forecasting models: (a) where the...