Abstract
We modify the union-of-rejection unit root test of Harvey et al. “Unit Root Testing in Practice: Dealing with Uncertainty over the Trend and Initial Condition” (Harvey, Econom Theory 25:587–636, 2009). This test rejects if either of two different unit root tests rejects but controls the inherent multiple testing issue by suitably modifying the critical values to ensure the desired null rejection probability. We evaluate the new tests’ power relative to existing ones’ and to the Gaussian asymptotic power envelope. An empirical application illustrates the usefulness of the new statistics.
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Acknowledgments
Without implicating, I would like to thank Matei Demetrescu, Graham Elliott and three anonymous referees for comments that helped to substantially improve the paper. GAUSS code used to produce all results in this paper is available upon request.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Hanck, C. Multiple unit root tests under uncertainty over the initial condition: some powerful modifications. Stat Papers 53, 767–774 (2012). https://doi.org/10.1007/s00362-011-0379-0
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DOI: https://doi.org/10.1007/s00362-011-0379-0