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A guide to the computation of stationarity tests

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Abstract

In this paper we compare ways of computing stationarity tests. We show that whereas some of the procedures recommended lead to inconsistency of the tests, it is still possible to compute a test with good properties in finite sample in terms of empirical size and power. The guidance suggested in the paper is illustrated by testing for the purchasing power parity hypothesis in some developed countries.

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Notes

  1. Similar results were obtained with the BIC and LWZ information criteria.

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Acknowledgements

We thank A. M. Taylor for providing us with the data, and the Editor, B. H. Baltagi, and two anonymous referees for helpful comments. Financial support is acknowledged from the Ministerio de Ciencia y Tecnología under grant SEJ2005-08646/ECON and SEJ2005-07781/ECON and Conselleria d'Economia, Hisenda i Innovació del Govern Balear under PRIB-2004-10095, respectively.

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Authors and Affiliations

  1. AQR Research Group, Departament d'Econometria, Estadística i Economia Espanyola, Universitat de Barcelona, Barcelona, Spain

    Josep Lluís Carrion-i-Silvestre

  2. Department d'Economia Aplicada, Universitat de les Illes Balears, Palma de Mallorca, Spain

    Andreu Sansó

  3. Av. Diagonal, 690, 08034, Barcelona, Spain

    Josep Lluís Carrion-i-Silvestre

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  1. Josep Lluís Carrion-i-Silvestre
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Correspondence to Josep Lluís Carrion-i-Silvestre.

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Carrion-i-Silvestre, J.L., Sansó, A. A guide to the computation of stationarity tests. Empirical Economics 31, 433–448 (2006). https://doi.org/10.1007/s00181-005-0023-8

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