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Unit root tests for time series with outliers

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  • Shin, Dong Wan
  • Sarkar, Sahadeb
  • Lee, Jong Hyup

Abstract

Effects of additive and innovational outliers on unit root tests in ARIMA(p, 1, q) models are investigated. The limiting distribution of the ordinary least-squares estimator of the unit root parameter in the AR(1) model is affected by additive outliers but is unaffected by innovational outliers. To test for a unit root in ARIMA(p, 1, q) models in the presence of outliers, a very simple, easy-to-compute procedure is given that detects additive outliers and adjusts the observations accordingly. The detection method performed well in our numerical experiment. Our unit root tests based on the adjusted data are shown to have very good empirical sizes and powers in AR(1), AR(2) and ARMA(1, 1) models.

Suggested Citation

  • Shin, Dong Wan & Sarkar, Sahadeb & Lee, Jong Hyup, 1996. "Unit root tests for time series with outliers," Statistics & Probability Letters, Elsevier, vol. 30(3), pages 189-197, October.
    • Handle: RePEc:eee:stapro:v:30:y:1996:i:3:p:189-197
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    References listed on IDEAS

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    Cited by:

    1. Pierre Perron & Gabriel Rodríguez, 2003. "Searching For Additive Outliers In Nonstationary Time Series," Journal of Time Series Analysis, Wiley Blackwell, vol. 24(2), pages 193-220, March.
    2. Olivier Darné, 2004. "The effects of additive outliers on stationarity tests: a monte carlo study," Economics Bulletin, AccessEcon, vol. 3(16), pages 1-8.
    3. Niels Haldrup & Antonio Montañés & Andreu Sansó, 2004. "Testing for Additive Outliers in Seasonally Integrated Time Series," Economics Working Papers 2004-14, Department of Economics and Business Economics, Aarhus University.
    4. Christian M. Hafner & Arie Preminger, 2016. "The effect of additive outliers on a fractional unit root test," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 100(4), pages 401-420, October.
    5. Gabriel Rodriguez & Dionisio Ramirez, 2014. "A Note on the Size of the ADF Test with Additive Outliers and Fractional Errors. A Reappraisal about the (Non)Stationarity of the Latin-American Inflation Series," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 37(73), pages 113-132.
    6. Olivier Darné & Claude Diebolt, 2006. "Chocs temporaires et permanents dans le PIB de la France, du Royaume-Uni et des États-Unis," Revue d'économie politique, Dalloz, vol. 116(1), pages 65-78.
    7. Darne, Olivier & Diebolt, Claude, 2004. "Unit roots and infrequent large shocks: new international evidence on output," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1449-1465, October.
    8. Olivier Darné & Amélie Charles, 2011. "Large shocks in U.S. macroeconomic time series: 1860-1988," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 5(1), pages 79-100, January.
    9. Charles, Amélie & Darné, Olivier, 2012. "Trends and random walks in macroeconomic time series: A reappraisal," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 167-180.
    10. Haldrup Niels & Montañes Antonio & Sansó Andreu, 2011. "Detection of Additive Outliers in Seasonal Time Series," Journal of Time Series Econometrics, De Gruyter, vol. 3(2), pages 1-20, April.
    11. Maican, Florin G. & Sweeney, Richard J., 2013. "Real exchange rate adjustment in European transition countries," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 907-926.
    12. Shin, Dong Wan & So, Beong Soo, 1999. "New tests for unit roots in autoregressive processes with possibly infinite variance errors," Statistics & Probability Letters, Elsevier, vol. 44(4), pages 387-397, October.
    13. Hirsch, Tristan & Rinke, Saskia, 2017. "Changes in Persistence in Outlier Contaminated Time Series," Hannover Economic Papers (HEP) dp-583, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    14. Haldrup, Niels & Montanes, Antonio & Sanso, Andreu, 2005. "Measurement errors and outliers in seasonal unit root testing," Journal of Econometrics, Elsevier, vol. 127(1), pages 103-128, July.
    15. Gabriel Rodriguez & Dionisio Ramirez, 2013. "A comparison between Tau-d and the procedure TRAMO-SEATS is also included," Documentos de Trabajo / Working Papers 2013-355, Departamento de Economía - Pontificia Universidad Católica del Perú.
    16. Niels Møller & Paul Sharp, 2014. "Malthus in cointegration space: evidence of a post-Malthusian pre-industrial England," Journal of Economic Growth, Springer, vol. 19(1), pages 105-140, March.
    17. Arranz, Miguel A. & Mármol, Francesc, 2002. "Effects of Applying Linear and Nonlinear Filters on Tests for Unit Roots with Additive Outliers," UC3M Working papers. Economics we20091101, Universidad Carlos III de Madrid. Departamento de Economía.
    18. Rickard Sandberg, 2015. "M-estimator based unit root tests in the ESTAR framework," Statistical Papers, Springer, vol. 56(4), pages 1115-1135, November.
    19. repec:ebl:ecbull:v:3:y:2004:i:16:p:1-8 is not listed on IDEAS

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