A novel simulation based approach to unit root testing is proposed in this paper. The test is constructed from the distinct orders in probability of the OLS parameter estimates obtained from a spurious and an unbalanced regression, respectively. While the parameter estimate from a regression of two integrated and uncorrelated time series is of order Op(1), the estimate is of order Op(T −1) if t...

The purpose of this study is to investigate the asymptotics of a first order auto regressive unit root process, AR(1). The goal is to determine which tests could be used to test for the presence of a unit root in a first order auto regressive process. A unit root is present when the root of the characteristic equation of this process equals unity. In order to test for the presence of a unit roo...

In this paper the asymptotic properties of ARMA processes with complex-conjugate unit roots in the AR lag polynomial are studied. These processes behave quite di¤erently from regular unit root processes (with a single root equal to 1). In particular, the asymptotic properties of a standardized version of the periodogram for such processes are analyzed, and a nonparametric test of the complex un...

This paper presents the nonlinear IV methodology as an effective inferential basis for nonstationary panels. The nonlinear IV method resolves the inferential difficulties in testing for unit roots arising from the intrinsic heterogeneities and cross-dependencies of panel models. Individual units are allowed to be dependent through correlations among innovations, interrelatedness of short-run dy...

It is generally believed that for the power of unit root tests, only the time span and not the observation frequency matters. In this paper we show that the observation frequency does matter when the high-frequency data display fat tails and volatility clustering, as is typically the case for nancial time series such as exchange rate returns. Our claim builds on recent work on unit root and coi...

We consider the bootstrap method for the covariates augmented DickeyFuller (CADF) unit root test suggested in Hansen (1995) which uses related variables to improve the power of univariate unit root tests. It is shown that there are substantial power gains from including correlated covariates. The limit distribution of the CADF test, however, depends on the nuisance parameter that represents the...

Recent studies of purchasing power parity (PPP) account for the possible presence of unit roots in nominal exchange rates and relative price indices by applying standard unit-root tests to real exchange rates, which are ratios of nominal exchange rates and relative price indices. These studies occasionally find evidence of PPP, but as a whole, the evidence is not definitive. Standard unit-root ...

Worldwide expansion of agriculture is impacting the earth’s climate by altering carbon, water, and energy fluxes, but the climate in turn is impacting crop production. To study this two-way interaction and its impact on seasonal dynamics of carbon, water, and energy fluxes, we implemented dynamic crop growth processes into a land surface model, the Integrated Science Assessment Model (ISAM). In...

This paper exploits the fact that any time series with a unit root can de decomposed into a stationary series and a random walk. Since the random walk component can have arbitrarily small variance, tests for unit roots or trend stationarity have arbitrarily low power in finite samples. Furthermore, there are unit root processes whose likelihood functions and autocorrelation functions are arbitr...