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Unit root testing

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Summary

The occurrence of unit roots in economic time series has far reaching consequences for univariate as well as multivariate econometric modelling. Therefore, unit root tests are nowadays the starting point of most empirical time series studies. The oldest and most widely used test is due to Dickey and Fuller (1979). Reviewing this test and variants thereof we focus on the importance of modelling the deterministic component. In particular, we survey the growing literature on tests accounting for structural shifts. Finally, further applied aspects are addressed, for instance, how to get the size correct and obtain good power at the same time.

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Authors and Affiliations

  1. Fachbereich Wirtschaftswissenschaft, Freie Universität Berlin, Boltzmannstr. 20, 14195, Berlin, Germany

    Jürgen Wolters

  2. Fachbereich Wirtschaftswissenschaften, Goethe-Universität Frankfurt, Gräfstr. 78, Uni-PF 76, 60054, Frankfurt am Main, Germany

    Uwe Hassler

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  1. Jürgen Wolters
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  2. Uwe Hassler
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We thank Mu-Chun Wang for producing the figures, and an anonymous referee for comments improving the presentation.

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Wolters, J., Hassler, U. Unit root testing. Allgemeines Statistisches Arch 90, 43–58 (2006). https://doi.org/10.1007/s10182-006-0220-6

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