Testing for Unit Roots with Stationary Covariances

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Testing for Unit Roots with Stationary Covariances

Author Info

Graham Elliott (UCSD)
Michael Jansson (UC Berkeley)

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Abstract

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 tests which are simple to construct (involving the running of vector autoregressions) and achieve at a point the power envelopes derived under very general conditions. These tests have excellent properties in small samples. We also show that these are obvious and internally consistent tests to run when identifying structural VAR's using long run restrictions.

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Publisher Info
Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number 2000-06.

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Date of creation: 01 May 2000
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Handle: RePEc:cdl:ucsdec:2000-06

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Article
- Elliott, Graham & Jansson, Michael, 2003. "Testing for unit roots with stationary covariates," Journal of Econometrics, Elsevier, vol. 115(1), pages 75-89, July. [Downloadable!] (restricted)
Paper
- Graham Elliott & Michael Jansson, . "Testing for Unit Roots with Stationary Covariates," Economics Working Papers 2000-6, School of Economics and Management, University of Aarhus. [Downloadable!]
- Graham Elliott & Michael Jansson, 2002. "Testing for Unit Roots with Stationary Covariates," University of California at San Diego, Economics Working Paper Series 2000-06r, Department of Economics, UC San Diego. [Downloadable!]

Cited by:
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Elena Pesavento & Barbara Rossi, 2004. "Do Technology Shocks Drive Hours Up or Down? A Little Evidence From an Agnostic Procedure," Econometrics 0411002, EconWPA. [Downloadable!]
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- Elena Pesavento & Barbara Rossi, 2003. "Do Technology Shocks Drive Hours Up or Down? A Little Evidence From an Agnostic Procedure," Emory Economics 0326, Department of Economics, Emory University (Atlanta). [Downloadable!]
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Lawrence J Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "How do Canadian hours worked respond to a technology shock?," International Finance Discussion Papers 774, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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Effrosyni Diamantoudi, . "Equilibrium Binding Agreements under Diverse Bahavioral Assumptions," Economics Working Papers 2001-2, School of Economics and Management, University of Aarhus. [Downloadable!]
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Bo Sandemann Rasmussen, . "Government Debt and Capital Accumulation in the Blanchard-Cass-Yaari OLG Model," Economics Working Papers 2000-14, School of Economics and Management, University of Aarhus. [Downloadable!]
Maurizio Bovi, 2004. "The Dark, And Independent, Side Of Italy," ISAE Working Papers 46, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
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Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What happens after a technology shock?," International Finance Discussion Papers 768, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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Lance J. Bachmeier & Norman R. Swanson, 2003. "Predicting Inflation: Does The Quantity Theory Help?," Departmental Working Papers 200317, Rutgers University, Department of Economics. [Downloadable!]
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Lupi, Claudio, 2009. "Covariate Augmented Dickey-Fuller Tests with R," Economics & Statistics Discussion Papers esdp09051, University of Molise, Dept. SEGeS. [Downloadable!]
Elena Pesavento, 2005. "Residuals Bases Tests for the Null of No Cointegration: an Analytical Comparison," Emory Economics 0503, Department of Economics, Emory University (Atlanta). [Downloadable!]
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Barbara Rossi & Elena Pesavento, 2004. "Do Technology Shocks Drive Hours Up or Down?," Econometric Society 2004 North American Summer Meetings 96, Econometric Society. [Downloadable!]
Nikolaj Malchow-Moeller & Bo Jellesmark Thorsen, . "Investment under Uncertainty - the Case of Repeated Investment Options," Economics Working Papers 2000-15, School of Economics and Management, University of Aarhus. [Downloadable!]

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