World Conference Econometric Society, 2000, Seattle

H. Peter Boswijk, University of Amsterdam |

Testing for a Unit Root with Near-Integrated Volatility |

Session: C-5-24 Sunday 13 August 2000 by Boswijk, H. Peter |

This paper considers tests for a unit root when the innovations follow a near-integrated GARCH process. We compare the asymptotic properties of the likelihood ratio statistic with that of the least-squares based Dickey-Fuller statistic. We first use asymptotics where the GARCH variance process is stationary with fixed parameters, and then consider parameter sequences such that the GARCH process converges to a diffusion process. In the fixed-parameter case, the asymptotic local power gain of the likelihood ratio test is only marginal for realistic parameter values. However, under near-integrated parameter sequences the difference in power is more pronounced. |

Submitted paper full-text in .pdf |

Most recent version of the paper |

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