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Improved critical values for the Enders-Granger unit-root test

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  • Walter Enders

Abstract

Enders and Granger provide critical values to test the null hypothesis of a unit-root against the alternative of threshold adjustment. However, in obtaining their critical values, Enders and Granger did not use a consistent estimate of the threshold nor did they use a lag-augmented data generating process. This note remedies both of these problems. The power of the test statistics using the consistent estimate of the threshold are compared to those of Enders-Granger and of Dickey-Fuller. Surprisingly, the original Enders-Granger statistic often has the highest power. As such, the Enders-Granger statistic using a lag-augmented data generating process is calculated.

Suggested Citation

  • Walter Enders, 2001. "Improved critical values for the Enders-Granger unit-root test," Applied Economics Letters, Taylor & Francis Journals, vol. 8(4), pages 257-261.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:4:p:257-261
    DOI: 10.1080/135048501750104033
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    References listed on IDEAS

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    1. Caner,M. & Hansen,B.E., 1998. "Threshold autoregression with a near unit root," Working papers 27, Wisconsin Madison - Social Systems.
    2. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-311, July.
    3. Pippenger, Michael K & Goering, Gregory E, 1993. "A Note on the Empirical Power of Unit Root Tests under Threshold Processes," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(4), pages 473-481, November.
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    Cited by:

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    8. Steven Cook & Neil Manning, 2003. "The power of asymmetric unit root tests under threshold and consistent-threshold estimation," Applied Economics, Taylor & Francis Journals, vol. 35(14), pages 1543-1550.
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    14. Cook, Steven, 2006. "The impact of GARCH on asymmetric unit root tests," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 369(2), pages 745-752.
    15. Atanu Ghoshray, 2009. "On Price Dynamics for Different Qualities of Coffee," Review of Market Integration, India Development Foundation, vol. 1(1), pages 103-118, April.
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    18. Cook, Steven, 2008. "Joint maximum likelihood estimation of unit root testing equations and GARCH processes: Some finite-sample issues," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 77(1), pages 109-116.
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