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On KPSS with GARCH errors

Author

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  • Marco Barassi

    (Department of Economics, University of Birmingham)

Abstract

In this paper we discuss the finite sample behavior of the KPSS test in the presence of conditionally heteroskedastic errors. We confirm that under stationary GARCH errors the asymptotics of the KPSS remains valid. However, in finite samples we observe a slight size distortion and a power distortion. Interestingly, IGARCH errors do not seem to affect the size of the test, however they may often cause a substantial loss of power.

Suggested Citation

  • Marco Barassi, 2005. "On KPSS with GARCH errors," Economics Bulletin, AccessEcon, vol. 3(55), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-05c40003
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    File URL: http://www.accessecon.com/pubs/EB/2005/Volume3/EB-05C40003A.pdf
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    Cited by:

    1. Rezitis Anthony N & Stavropoulos Konstantinos S, 2011. "Price Transmission and Volatility in the Greek Broiler Sector: A Threshold Cointegration Analysis," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 9(1), pages 1-37, July.
    2. Lujia Bai & Weichi Wu, 2021. "Detecting long-range dependence for time-varying linear models," Papers 2110.08089, arXiv.org, revised Mar 2023.
    3. Constantinescu, Mihnea & Lastauskas, Povilas, 2018. "The knotty interplay between credit and housing," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 241-266.

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