New Unit Root Asymptotics in the Presence of Deterministic Trends

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dc.contributor.author Phillips, Peter en
dc.date.accessioned 2006-11-30T20:53:39Z en
dc.date.available 2006-11-30T20:53:39Z en
dc.date.issued 1998 en
dc.identifier.citation Department of Economics Working Paper Series 184 en
dc.identifier.uri http://hdl.handle.net/2292/196 en
dc.description.abstract Recent work by the author (1998) has shown that stochastic trends can be validly represented in empirical regressions in terms of deterministic functions of time. These representations offer an alternative mechanism for modelling stochastic trends. It is shown here that the alternate representations affect the asymptotics of all commonly used unit root tests in the presence of trends. In particular, the critical values of unit root tests diverge when the number of deterministic regressors K -+ rn as the sample size n + w. In such circumstances, use of conventional critical values based on fixed K will lead to rejection of the null of a unit root in favour of trend stationarity with probability one when the null is true. The results can be interpreted as saying that serious attempts to model trends by deterministic functions will always be successful and that these functions can validly represent stochastically trending data even when lagged variables are present in the regressor set, thereby undermining conventional unit root tests. en
dc.format.extent application/pdf en
dc.format.mimetype text en
dc.language.iso en en
dc.publisher ResearchSpace@Auckland en
dc.relation.ispartofseries Department of Economics Working Paper Series (1997-2006) en
dc.rights Items in ResearchSpace are protected by copyright, with all rights reserved, unless otherwise indicated. Previously published items are made available in accordance with the copyright policy of the publisher. en
dc.rights.uri https://researchspace.auckland.ac.nz/docs/uoa-docs/rights.htm en
dc.subject.other Deterministic trends en
dc.subject.other Economics en
dc.title New Unit Root Asymptotics in the Presence of Deterministic Trends en
dc.type Working Paper en
dc.rights.holder Copyright: the author en
dc.rights.accessrights http://purl.org/eprint/accessRights/OpenAccess en
pubs.org-id Economics en


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