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Modern Econometric Analysis pp 41–56Cite as

Unit Root Testing

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Abstract

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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These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

We thank Mu-Chun Wang for producing the figures, and an anonymous referee for comments improving the presentation.

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Author information

Authors and Affiliations

  1. Fachbereich Wirtschaftswissenschaft, Freie Universität Berlin, Berlin

    Jürgen Wolters

  2. Fachbereich Wirtschaftswissenschaften, J.W. Goethe Universität Frankfurt, Frankfurt

    Uwe Hassler

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  1. Jürgen Wolters
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  2. Uwe Hassler
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  1. Empirical Economic Research and Econometrics, University of Hannover, Königsworther Platz 1, 30167, Hannover, Germany

    Olaf Hübler

  2. University of Bielefeld, Universitätsstraße 25, 33615, Bielefeld, Germany

    Jachim Frohn

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Wolters, J., Hassler, U. (2006). Unit Root Testing. In: Hübler, O., Frohn, J. (eds) Modern Econometric Analysis. Springer, Berlin, Heidelberg. https://doi.org/10.1007/3-540-32693-6_4

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