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Can Tests for Stochastic Unit Roots Provide Useful Portmanteau Tests for Persistence?

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  • Taylor, A M Robert
  • van Dijk, Dick

Abstract

In this paper we investigate whether or not the recently developed class of tests of the unit root null against the alternative of a stochastic unit root forms a useful statistical tool in distinguishing between time series processes whose degree of persistence is no more than that of a unit root [I(1)] process and those which display a greater degree of persistence than I(1) series, the stochastic unit root process being an example of the latter. For a wide range of processes which have been put forward as serious competitors to the I(1) process, both of a greater and lesser degree of persistence, we find, via numerical simulation methods, that broadly speaking the stochastic unit root tests do indeed appear to provide an efficacious diagnostic tool in this regard. Copyright 2002 by Blackwell Publishing Ltd

Suggested Citation

  • Taylor, A M Robert & van Dijk, Dick, 2002. "Can Tests for Stochastic Unit Roots Provide Useful Portmanteau Tests for Persistence?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(4), pages 381-397, September.
    • Handle: RePEc:bla:obuest:v:64:y:2002:i:4:p:381-97
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    Cited by:

    1. Gawon Yoon, 2010. "Nonlinear mean-reversion to purchasing power parity: exponential smooth transition autoregressive models and stochastic unit root processes," Applied Economics, Taylor & Francis Journals, vol. 42(4), pages 489-496.
    2. Gawon Yoon, 2010. "Nonlinear mean reversion in real exchange rates: threshold autoregressive models and stochastic unit root processes," Applied Economics Letters, Taylor & Francis Journals, vol. 17(8), pages 797-804.
    3. Hyginus Leon & Serineh Najarian, 2005. "Asymmetric adjustment and nonlinear dynamics in real exchange rates," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(1), pages 15-39.
    4. Yoon, Gawon, 2005. "Has the U.S. economy really become less correlated with that of the rest of the world?," Economic Modelling, Elsevier, vol. 22(1), pages 147-158, January.
    5. Gawon Yoon, 2005. "Stochastic Unit Roots in the Capital Asset Pricing Model?," Bulletin of Economic Research, Wiley Blackwell, vol. 57(4), pages 369-389, October.
    6. Yoon, Gawon, 2016. "Stochastic unit root processes: Maximum likelihood estimation, and new Lagrange multiplier and likelihood ratio tests," Economic Modelling, Elsevier, vol. 52(PB), pages 725-732.

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