Testing for Unit Root Against Stationarity Using the Likelihood Ratio Test |
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Authors: | Nikolay Angelov Rolf Larsson |
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Affiliation: | 1. Department of Economics , Uppsala University , Uppsala, Sweden nikolay.angelov@nek.uu.se;3. Department of Statistics , Uppsala University , Uppsala, Sweden |
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Abstract: | In a first-order autoregressive model with drift, we derive the likelihood ratio test for a unit root against the stationary alternative. We also derive the test in a state space model with trend. Finite sample and asymptotic critical values are obtained by Monte Carlo simulations. A simulation study investigates the power performance of the likelihood ratio test and we also examine how a bias correction of the test affects the results. |
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Keywords: | LR test Stationary alternative Unit root |
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