Abstract
In an important generalization of zero frequency autore-
gressive unit root tests, Hylleberg, Engle, Granger, and Yoo (1990) developed
regression-based tests for unit roots at the seasonal frequencies in quarterly time
series. We develop likelihood ratio tests for seasonal unit roots and show that
these tests are "nearly efficient" in the sense of Elliott, Rothenberg, and Stock
(1996), i.e. that their local asymptotic power functions are indistinguishable
from the Gaussian power envelope. Currently available nearly efficient testing
procedures for seasonal unit roots are regression-based and require the choice
of a GLS detrending parameter, which our likelihood ratio tests do not.
gressive unit root tests, Hylleberg, Engle, Granger, and Yoo (1990) developed
regression-based tests for unit roots at the seasonal frequencies in quarterly time
series. We develop likelihood ratio tests for seasonal unit roots and show that
these tests are "nearly efficient" in the sense of Elliott, Rothenberg, and Stock
(1996), i.e. that their local asymptotic power functions are indistinguishable
from the Gaussian power envelope. Currently available nearly efficient testing
procedures for seasonal unit roots are regression-based and require the choice
of a GLS detrending parameter, which our likelihood ratio tests do not.
| Original language | English |
|---|---|
| Place of publication | Aarhus |
| Publisher | Institut for Økonomi, Aarhus Universitet |
| Number of pages | 17 |
| Publication status | Published - 2009 |
Keywords
- Likelihood Ratio Test, Seasonal Unit Root Hypothesis