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F versus t tests for unit roots

Author

Listed:
  • Peter E. Kennedy

    (Simon Fraser University)

  • John Elder

    (North Dakota State University)

Abstract

F tests which test jointly for a unit root and a zero intercept, and so compete against Dickey-Fuller t tests, are shown not to enhance power because they are invariant to the intercept value in the absence of a unit root. Monte Carlo results in the literature that indicate otherwise are shown to have resulted from the use of special starting values. Testing procedures that employ these F tests to enhance power should be revised.

Suggested Citation

  • Peter E. Kennedy & John Elder, 2001. "F versus t tests for unit roots," Economics Bulletin, AccessEcon, vol. 3(3), pages 1-6.
    • Handle: RePEc:ebl:ecbull:eb-01c10001
    as

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    File URL: http://www.accessecon.com/pubs/EB/2001/Volume3/EB-01C10001A.pdf
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    References listed on IDEAS

    as
    1. Darryl Holden & Roger Perman, 1994. "Unit Roots and Cointegration for the Economist," Palgrave Macmillan Books, in: B. Bhaskara Rao (ed.), Cointegration, chapter 3, pages 47-112, Palgrave Macmillan.
    2. Perron, Pierre, 1988. "Trends and random walks in macroeconomic time series : Further evidence from a new approach," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 297-332.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. Ayat, Leila & Burridge, Peter, 2000. "Unit root tests in the presence of uncertainty about the non-stochastic trend," Journal of Econometrics, Elsevier, vol. 95(1), pages 71-96, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Elder, John & Serletis, Apostolos, 2009. "Oil price uncertainty in Canada," Energy Economics, Elsevier, vol. 31(6), pages 852-856, November.
    2. Don Bredin & John Elder & Stilianos Fountas, 2011. "Oil volatility and the option value of waiting: An analysis of the G‐7," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 31(7), pages 679-702, July.
    3. Peter E. Kennedy & John Elder, 2004. "More on F versus t tests for unit roots when there is no trend," Economics Bulletin, AccessEcon, vol. 3(37), pages 1-6.
    4. John Elder & Apostolos Serletis, 2008. "Long memory in energy futures prices," Review of Financial Economics, John Wiley & Sons, vol. 17(2), pages 146-155.
    5. Elder, John, 2020. "Employment and energy uncertainty," The Journal of Economic Asymmetries, Elsevier, vol. 21(C).
    6. Fuerst, Michael E., 2006. "Investor risk premia and real macroeconomic fluctuations," Journal of Macroeconomics, Elsevier, vol. 28(3), pages 540-563, September.
    7. John Elder, 2004. "Some empirical evidence on the real effects of nominal volatility," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 28(1), pages 1-13, March.
    8. repec:ebl:ecbull:v:3:y:2004:i:12:p:1-7 is not listed on IDEAS
    9. repec:ebl:ecbull:v:3:y:2004:i:37:p:1-6 is not listed on IDEAS
    10. Elder, John & Payne, James E., 2023. "Racial and ethnic disparities in unemployment and oil price uncertainty," Energy Economics, Elsevier, vol. 119(C).
    11. John Elder & Peter E. Kennedy, 2001. "Testing for Unit Roots: What Should Students Be Taught?," The Journal of Economic Education, Taylor & Francis Journals, vol. 32(2), pages 137-146, January.

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    More about this item

    Keywords

    Dickey-Fuller;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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