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Tapered Block Bootstrap for Unit Root Testing

Author

Listed:
  • Parker Cameron C.

    (Department of Mathematics and Computer Science, University of San Diego, 5998 Alcala Park, San Diego, CA 92110, USA)

  • Paparoditis Efstathios

    (Department of Mathematics and Statistics, University of Cyprus, Nicosia, Cyprus)

  • Politis Dimitris

    (Department of Mathematics, University of California, San Diego, CA, USA)

Abstract

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.

Suggested Citation

  • Parker Cameron C. & Paparoditis Efstathios & Politis Dimitris, 2015. "Tapered Block Bootstrap for Unit Root Testing," Journal of Time Series Econometrics, De Gruyter, vol. 7(1), pages 37-67, January.
    • Handle: RePEc:bpj:jtsmet:v:7:y:2015:i:1:p:31:n:4
    DOI: 10.1515/jtse-2013-0033
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    References listed on IDEAS

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    1. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220, National Bureau of Economic Research, Inc.
    2. Evangelos E. Ioannidis, 2005. "Residual-based block bootstrap unit root testing in the presence of trend breaks," Econometrics Journal, Royal Economic Society, vol. 8(3), pages 323-351, December.
    3. Franses,Philip Hans & Dijk,Dick van, 2000. "Non-Linear Time Series Models in Empirical Finance," Cambridge Books, Cambridge University Press, number 9780521770415, September.
    4. West, Kenneth D, 1988. "Asymptotic Normality, When Regressors Have a Unit Root," Econometrica, Econometric Society, vol. 56(6), pages 1397-1417, November.
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