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HETEROSKEDASTICITY-ROBUST TESTING FOR A FRACTIONAL UNIT ROOT

Published online by Cambridge University Press:  01 December 2009

Hsein Kew  and
David Harris
Hsein Kew
Affiliation:
Monash University
David Harris*
Affiliation:
University of Melbourne
*
*Address correspondence to David Harris, Department of Economics, University of Melbourne, Victoria 3010, Australia. e-mail: harrisd@unimelb.edu.au.
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Abstract

This paper shows how fractional unit root tests originally derived under stationarity can be made robust to heteroskedasticity. This is done by using existing tests nested in a regression framework and then implementing these tests using White’s heteroskedasticity consistent standard errors (White, 1980). We show this approach is effective both asymptotically and in finite samples. We also provide some evidence on the asymptotic local power of different implementations of the tests, under both homoskedasticity and heteroskedasticity.

Type
ARTICLES
Information
Econometric Theory , Volume 25 , Issue 6: Newbold Conference Special Issue , December 2009 , pp. 1734 - 1753
Copyright
Copyright © Cambridge University Press 2009

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