Article

Wald Tests of I(1) against I(d) Alternatives: Some New Properties and an Extension to Processes with Trending Components

Institut d'Analisi Economica (CSIC)
Studies in Nonlinear Dynamics & Econometrics (Impact Factor: 0.28). 02/2008; 12(4):1562-1562. DOI: 10.2202/1558-3708.1562
Source: RePEc

ABSTRACT This paper analyses the behaviour of a Wald-type test, i.e., the (Efficient) Fractional Dickey-Fuller (EFDF) test of I(1) against I(d), d<1, relative to LM tests. Further, it extends the implementation of the EFDF test to the presence of deterministic trending components in the DGP. Tests of these hypotheses are important in many macroeconomic applications where it is crucial to distinguish between permanent and transitory shocks because shocks die out in I(d) processes with d<1. We show how simple the implementation of the EFDF in these situations is and argue that, under fixed alternatives, it is preferred to the LM test in Bahadur's sense. Finally, an empirical application is provided where the EFDF approach allowing for deterministic components is used to test for long-memory in the GDP p.c. of several OECD countries, an issue that has important consequences to discriminate between alternative growth theories.

0 Followers
 · 
98 Views
  • [Show abstract] [Hide abstract]
    ABSTRACT: Lobato and Velasco (20077. Lobato , I. and Velasco , C. 2007 . Efficient wald tests for fractional unit roots . Econometrica , 75 : 575 – 90 . [CrossRef], [Web of Science ®]View all references) introduced a test for a unit root against fractional alternatives with good power and performance properties. The purpose of this article is to examine the size of the test in the presence of level and trend breaks under the null hypothesis. The results suggest that test size remains relatively unaffected by level breaks but that the test can be undersized when there are breaking trends.
    Applied Economics Letters 01/2012; 19(1-1):83-85. DOI:10.1080/13504851.2011.568382
  • [Show abstract] [Hide abstract]
    ABSTRACT: Malaysia is one of the largest producers of both white and black pepper. This paper examines the relationships within and between six spatially separated pepper markets in the state of Sarawak. The results suggest some evidence that white pepper and black pepper prices are spatially threshold‐cointegrated and that both white pepper and black pepper prices exhibit evidence of threshold cointegration across markets. La Malaisie figure parmi les plus importants producteurs de poivres noir et blanc. Le présent article examine les liens qui existent au sein de six marchés de poivre spatialement distincts dans l’État de Sarawak ainsi que les liens qui existent entre ces marchés. Les résultats autorisent à penser que les prix du poivre noir et du poivre blanc sont liés par une relation de cointégration avec un effet de seuil et que les prix des poivres noir et blanc sur différents marchés sont aussi liés par des relations de cointégration avec effets de seuil.
    Canadian Journal of Agricultural Economics/Revue canadienne d agroeconomie 09/2011; 59(3):405-416. DOI:10.1111/j.1744-7976.2010.01207.x
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: Romero-A´ vila and Usabiaga (2007) find that many U.S. state unemployment rates are stationary, a result at odds with the traditional view that unemployment rates are pathdependent and subject to shocks that have permanent effects. They base their results on multivariate unit root tests that provide for two breaks in mean. This note extends the analysis to directly examine whether the series were fractionally integrated. When no allowance is made for breaking means, the results suggest evidence in favor of hysteresis, an outcome that generally applies when one break in mean is considered. Allowing for two breaks demonstrates that the evidence in favor of the natural rate and the hysteresis hypotheses is temporally sensitive.
    Southern Economic Journal 10/2009; 76(2):458-466. DOI:10.4284/sej.2009.76.2.458

Full-text (2 Sources)

Download
66 Downloads
Available from
May 29, 2014