The bad small sample performance of unit root tests is well known and depends partly on the existence of nuisance parameters. To deal with this Johansen (2004) presents a small sample correction of the Dickey-Fuller test. The correction factor depends on biased parameter estimates. The purpose of this study is to, through simulation, compare the small sample correction with a bootstrap approach...

For univariate time series we suggest a new variant of efficient score tests against fractional alternatives. This test has three important merits. First, by means of simulations we observe that it is superior in terms of size and power in some situations of practical interest. Second, it is easily understood and implemented as a slight modification of the Dickey-Fuller test, although our score...

This paper describes CADFtest, a R (R Development Core Team 2008) package for testing for the presence of a unit root in a time series using the Covariate Augmented Dickey-Fuller (CADF) test proposed in Hansen (1995). The procedures presented here are user friendly, allow fully automatic model specification, and allow computation of the asymptotic p-values of the test.

We derive the probability limit of the standard Dickey-Fuller-test in the context of an exponential random walk. This result might be useful in interpreting tests for unit roots when the test is inadvertantly applied to the levels of the data when the "true" random walk is in the logs. 1 Research supported by Deutsche Forschungsgemeinschaft via SFB 475; we are grateful to Werner Ploberger for h...

This note shows that the Augmented Dickey Fuller test is consi stent against fractional alternatives if the order of the autoregres sion does not tend to in nity too fast

We propose a simple modification to the general-to-specific lag-length selection method typically employed in a standard augmented Dickey-Fuller (ADF) test and apply it to examine the stationarity of OECD countries’ inflation rates. Instead of using the entire set of lags selected by the general-to-specific method, we suggest using only the lags that are statistically significant. Our Monte Car...

In the first half of the paper I study spurious regressions in panel data. Asymptotic properties of the least-squares dummy variable (LSDV) estimator and other conventional statistics are examined. The asymptotics of LSDV estimator are different from those of the spurious regression in the pure time-series. This has an important consequence for residual-based cointegration tests in panel data, ...

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...