Infrequent permanent shocks and the finite-sample performance of unit root tests

This paper examines the finite sample properties of Dickey-Fuller tests for unit roots when shocks occur infrequently. In this case the standard Dickey-Fuller critical values result in too many rejection of the unit root full hypothesis but the power of the Dickey-Fuller test is not dramatically alt...

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Bibliographic Details
Published in:Economics letters 1991-01, Vol.36 (3), p.269-273
Main Authors: Balke, Nathan S., Fomby, Thomas B.
Format: Article
Language:English
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Summary:This paper examines the finite sample properties of Dickey-Fuller tests for unit roots when shocks occur infrequently. In this case the standard Dickey-Fuller critical values result in too many rejection of the unit root full hypothesis but the power of the Dickey-Fuller test is not dramatically altered.
ISSN:0165-1765
1873-7374
DOI:10.1016/0165-1765(91)90031-F