Testing for near I(2) trends when the signal to noise ratio is small

Katarina Juselius

No 2014-8, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Researchers seldom find evidence of I(2) in exchange rates, prices, and other macroeconomics time series when they test the order of integration using univariate Dickey-Fuller tests. In contrast, when using the multivariate ML trace test we frequently find double unit roots in the data. Our paper demonstrates by simulations that this often happens when the signal-to-noise-ratio is small.

Keywords: univariate and multivariate unit root tests; double unit roots; near I(2) (search for similar items in EconPapers)
JEL-codes: C1 C18 C22 C32 C52 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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http://www.economics-ejournal.org/economics/discussionpapers/2014-8
https://www.econstor.eu/bitstream/10419/92417/1/778287726.pdf (application/pdf)

Related works:
Journal Article: Testing for near I(2) trends when the signal-to-noise ratio is small (2014)
Working Paper: Testing for Near I (2) Trends When the Signal to Noise Ratio is Small (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:20148

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