On the performance of the variance ratio unit root tests with flexible Fourier form

This article introduces a new unit root test that combines the variance ratio framework with the Flexible Fourier Form under the generalized least squares detrending mechanism. The advantage of the proposed method against its alternatives can be listed as: (1) it suggests a non-parametric procedure...

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Bibliographic Details
Published inJournal of applied statistics Vol. 48; no. 13-15; pp. 2560 - 2579
Main Authors Erog Lu, Burak A, Yıldırım, Selim
Format Journal Article
LanguageEnglish
Published England Taylor & Francis 18.11.2021
Subjects
flexible Fourier form
GLS detrending
Time-Series Analysis
Unit root test
variance ratio
flexible Fourier form
variance ratio
Unit root test
GLS detrending
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Summary:This article introduces a new unit root test that combines the variance ratio framework with the Flexible Fourier Form under the generalized least squares detrending mechanism. The advantage of the proposed method against its alternatives can be listed as: (1) it suggests a non-parametric procedure that does not require any parametric or semi-parametric model to remove serial correlation in the innovation process; (2) it can reasonably adapt itself to deal with the multiple structural breaks with various functional specifications. In the simulation exercises, we show that the proposed method exhibits satisfactory performance in the size and size-adjusted power analysis.
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ISSN:0266-4763
1360-0532
DOI:10.1080/02664763.2020.1796939