Lyócsa, Štefan and Výrost, Tomáš and Baumöhl, Eduard (2011): Unit-root and stationarity testing with empirical application on industrial production of CEE-4 countries.
Download (629kB) | Preview
The purpose of this paper is to explain both the need and the procedures of unit-root testing to a wider audience. The topic of stationarity testing in general and unit root testing in particular is one that covers a vast amount of research. We have been discussing the problem in four different settings. First we investigate the nature of the problem that motivated the study of unit-root processes. Second we present a short list of several traditional as well as more recent univariate and panel data tests. Third we give a brief overview of the economic theories, in which the testing of the underlying research hypothesis can be expressed in a form of a unit-root / stationary test like the issues of purchasing power parity, economic bubbles, industry dynamic, economic convergence and unemployment hysteresis can be formulated in a form equivalent to the testing of a unit root within a particular series. The last, fourth aspect is dedicated to an empirical application of testing for the non-stationarity in industrial production of CEE-4 countries using a simulation based unit-root testing methodology.
|Item Type:||MPRA Paper|
|Original Title:||Unit-root and stationarity testing with empirical application on industrial production of CEE-4 countries|
|Keywords:||Unit-root, Stationarity, Univariate tests, Panel tests, Simulation based unit root tests, Industrial production|
|Subjects:||C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C20 - General
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E23 - Production
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C30 - General
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E60 - General
|Depositing User:||Eduard Baumöhl|
|Date Deposited:||19. Mar 2011 19:02|
|Last Modified:||12. May 2014 21:35|
 Afonso, A. – Rault, Ch. (2010). What Do We Really Know about Fiscal Sustainability in the EU? A Panel Data Diagnostic. Review of World Economics, 145(4), 731–55.
 Amara, J. – Papell, D. H. (2006). Testing for Purchasing Power Parity using stationary covariates. Applied Financial Economics, 16(1-2), 29-39.
 Banerjee, A. – Dolado, J. – Galbraith, J. W. – Hendry, D. F. (1993). Co-integration, error correction, and the econometric analysis of non-stationary data, reprint 2003. Oxford University Press, New York.
 Baum, Ch. F. – Barkoulas, J. T. – Caglayan, M. (1999). Long memory or structural breaks: can either explain nonstationary real exchange rates under the current float? Journal of International Financial Markets, Institutions and Money, 9(4), 359-76.
 Baumöhl, E. – Lyócsa, Š. (2009). Stationarity of Time Series and the Problem of Spurious Regression. SSRN Working Paper Series. Available at: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1480682>.
 Belke, A. – Polleit, T. (2009). Monetary Economics in Globalised Financial Markets. Springer-Verlag Berlin.
 Breitung, J. – Das, S. (2005). Panel unit root tests under cross-sectional dependence. Statistica Neerlandica, 59(4), 414-33.
 Breuer, J. B. – McNown, R. – Wallace, M. (2002). Series-specific Unit Root Tests with Panel Data. Oxford Bulletin of Economics and Statistics, 64(5), 527-546.
 Camarero, M. – Carrion-i-Silvestre, J. L. – Tamarit, C. (2006). Testing for hysteresis in employment in OECD countries. New evidence using stationarity panel tests with breaks. Oxford Bulleting of Economics and Statistics, 68(2), 167-82.
 Carrion-i-Silvestre, J. L. – Sansó, A. (2007). The KPSS test with two structural breaks. Spanish Economic review, 9(2), 105-27.
 Chang, H.L. – Su, Ch.W. – Zhu, M. N. (2010). Is Middle East Countries Per Capita Real GDP Stationary? Evidence from Non-linear Panel Unit-root Tests. Middle Eastern Finance and Economics, 6, 15-19.
 Chang, Y. (2002). Nonlinear IV Unit Root Tests in Panels with Cross-Sectional Dependency, Journal of Econometrics, 110(2), 261-92.
 Chen, S. W. (2009). Non-stationary and Non-linearity in Stock Prices: Evidence from the OECD Countries, Economics Bulletin, 3(11), 1-11.
 Choi, I. (2001). Unit Root Tests for Panel Data, Journal of International Money and Finance, 20(2), 249-72.
 Choi, I. (2006). Combination Unit Root Tests for Cross-sectionally Correlated Panels. In: Corbae, D. – Durlauf, S. – Hansen, B. (Eds.), Econometric Theory and Practice: Frontiers of Analysis and Applied Research, essays in honor of Peter C. B. Phillips. Cambridge: Cambridge University Press.
 Christidou, M. – Panagiotidis, T. (2010). Purchasing Power Parity and the European single currency: Some new evidence. Economic Modelling, 27(5), 1116-123.
 Christopoulos, D. K. – Tsionas, E. G. (2007). Are US regional incomes converging? A nonlinear perspective. Regional Studies, 41(4), 525-30.
 Clemente, J. – Montanes, A. – Reyes, M. (1998). Testing for a unit root in variables with a double change in the mean. Economics Letters, 59(2), 175-182.
 Cuestas, J. C. (2009). Purchasing power parity in Central and Eastern European countries: an analysis of unit roots and nonlinearities. Applied Economics Letters, 16(1), 87-94.
 Cunado, J. – Gil-Alana, L. A. – Perez de Gracia, F. (2007). Testing for stock market bubbles using nonlinear models and fractional integration. Applied Financial Economics, 17(16), 1313-1321.
 Darné, O. (2009). The uncertain unit root in real GNP: A re-examination. Journal of Macroeconomics, 31(1), 153-66.
 Davidson, R. – MacKinnon, J.G. (2003). Econometric theory and Methods. Oxford University Press, New York. ISBN 0-19-512372-7
 Dickey, D. A. – Fuller, W. A. (1979). Distribution of the Estimators for Autoregressive Time Series With a Unit Root. Journal of the American Statistical Association, 74(366), 427-31.
 Dickey, D. A. – Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(4), 1057-72.
 Divino, J. A. – Teles, V. K. – Andrade, J. P. (2009). On the purchasing power parity for latin-american countries. Journal of Applied Economics, 12(1), 33-54.
 Elliott, G. – Jansson, M. (2003). Testing for unit roots with stationary covariates. Journal of Econometrics, 115(1), 75-89.
 Elliott, G. – Rothenberg, T. J. – Stock, J. H. (1996). Efficient tests for an autoregressive unit root. Econometrica, 64(4), 813-36.
 Gallet, C, A. – List, J. A. (2001). Market share instability: an application of unit root tests to the cigarette industry. Journal of Economics and Business, 53(5), 473-80.
 Giannetti, C. (2009). Unit Roots and the Dynamics of Market Shares: An analysis using an Italian Banking micro-panel. Center for Economic Research: Tilburg University, 2008-44.
 Granger, C. W. J. – Newbold, P. (1974). Spurious regression in econometrics. Journal of Econometrics, 2(2), 111-20.
 Granger, C. W. J. (2003). Spurious Regressions in Econometrics, A companion to Theoretical Econometrics, ed. Baltagi, B. H., Blackwell Publishing, 557-61.
 Hadri, K. – Rao, Y. (2008). Panel stationarity test with structural break. Oxford Bulletin of Economics and Statistics, 70(2), 245-69.
 Hadri, K. – Rao, Y. (2008). Panel Stationarity Test with Structural Break. Oxford Bulletin of Economics and Statistics, 70(2), 245-69.
 Hadri, K. (2000). Testing for stationarity in heterogeneous panels. The Econometrics Journal, 3(2), 148-61.
 Hamilton, J. D. (1994). Time Series Analysis. Princeton University Press.
 Harris, D. – Leybourne, S. – McCabe, B. (2005). Panel Stationarity Tests for Purchasing Power Parity with Cross-Sectional Dependence. Journal of Busienss and Economic Statistics, 23(4), 395-409.
 Harris, R. D. F. – Tzavalis, E. (1999). Inference for unit roots in dynamic panels where the time dimension is fixed. Journal of Econometrics, 91(2), 201-26.
 Holmes, M. – Otero, J. – Panagiotidis, T. (2010). Are EU Budget Deficits Stationary? Empirical Economics, 38(3), 767–78.
 Holmes, M. J. – Grimes, A. (2008). Is There Long-run Convergence among Regional House Prices in the UK? Urban Studies, 45(8), 1531-44.
 Holmes, M. J. (2009). How Convergent are Regional House Prices in the United Kingdom? Some New Evidence from Panel Data Unit Root Testing. Journal of Economic and Social Research, 9(1), 1-17.
 Im, K. – Pesaran, M. – Shin, Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, 115(1), 53–74.
 Im. S. K. – Lee, J. – Tieslau, M. (2010). Stationarity of Inflation: Evidence from Panel Unit Root Tests with Trend Shifts. 20th Annual Meetings of the Midwest Econometrics Group, Oct 1-2, 2010.
 Ito, T. (2009). Fisher Hypothesis in Japan: Analysis of Long-term Interest Rates under Different Monetary Policy Regimes. The World Economy, 32(7), 1019-35.
 Jirasakuldech, B. – Emekter, R. – Went, P. (2006). Rational speculative bubbles and duration dependence in exchange rates: an analysis of five currencies. Applied Financial Economics, 16(3), 233-43.
 Johnson, P. A. (2006). Is it really the Fisher effect? Applied Economics Letters, 13(4), 201-03.
 Kapetanios, G. – Shin, Y. – Snell, A. (2003). Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics, 112(2), 359-379.
 Kasman, S. – Kasman, A. – Ayhan, D. (2010). Testing the Purchasing Power Parity Hypothesis for the New Member and Candidate Countries of the European Union: Evidence from Lagrange Multiplier Unit Root Tests with Structural Breaks. Emerging Markets Finance & Trade, 46(2), 53-65.
 Kejriwal, M. – Lopez, C. (2010). Unit Roots, Level Shifts and Trend Breaks in Per Capita Output: A Robust Evaluation. Department of Economics: Purdue University, 1227.
 Kim, D. – Perron, P. Unit root tests allowing for a break in the trend function at an unknown time under both the null and alternative hypotheses, Journal of Econometrics, 148(1), 1-13.
 Kirikos, D. G. – Rich, K. (1994). Some tests for speculative exchange rate bubbles based on unit root tests, Spoudai, 44(1-2), 15-30.
 Kuo, B-S. – Mikkola, A. (1999). Re-examining Long-run Purchasing Power Parity. Journal of International Money & Finance, 18(2), 251-66.
 Kwiatkowski, D. – Phillips, P. C. B. – Schmidt, P. – Shin, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root. Journal of Econometrics, 159-78.
 Lee, J. – Strazicich, M. (2001). Testing the null of stationarity in the presence of a structural break. Applied Economics Letters, 8(6), 377-82.
 Lee, J. – Strazicich, M. (2003). Minimum lagrange multiplier unit root test with two structural breaks. The Review of Economics and Statistics, 85(4), 1082-89.
 Lee, J. – Strazicich, M. (2004). Minimum LM Unit Root Test with One Structural Break, Department of Economics, Appalachian State University, 04-16.
 Lee, Junsoo, Kyung S. Im, and Margie Tieslau (2005), Panel LM unit root tests with level shifts, Oxford Bulletin of Economics and Statistics, 67(3), 393-419.
 León-Ledesma, M. – McAdam, P. (2004). Unemployment, Hysteresis and Transition. Scottish Journal of Political Economy, 51(3), 377-401.
 Levin, A. – Lin, C.F. – Chu, C.S. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite Sample Properties. Journal of Econometrics, 108(1), 1–24.
 Levin, A. – Lin, C.F. (1993). Unit Root Test in Panel Data: New Results, Discussion Paper, 93-56, Department of Economics, University of California at San Diego.
 Leybourne, S. J. – McCabe, B. P. M. (1994). A consistent test for a Unit Root. Journal of Business & Economic Statistics, 12(2), 157-66.
 Llorca, M. – Redzepagic, S. (2008). Debt Sustainability in the EU New Member States: Empirical Evidence from a Panel of Eight Central and East European Countries. Post-Communist Economies, 20(2), 159–72.
 Lopez, C. (2008). Evidence of purchasing power parity for the floating regime period. Journal of International Money and Finance, 27(1), 156-164.
 Lumsdaine, R. L. – Papell, D. H. (1997). Multiple Trend Breaks and the Unit-Root Hypothesis, The Review of Economics and Statistics, 79(02), 212-218.
 Lyócsa, Š. – Baumöhl, E. – Výrost, T. (2011). The Stock Markets and Real Economic Activity: New Evidence from CEE. Eastern European Economics, forthcoming.
 Maddala, G. – Wu, S. (1999). A Comparative Study of Unit Root Tests and a New Simple Test, Oxford Bulletin of Economics and Statistics, 61(0), 631-52.
 Marmol, F. (1996). Nonsense regressions between integrated processes of different orders. Oxford Bulletin of Economics and Statistics, 58(3), p.525-36.
 Moon, H. – Perron, B. (2004). Testing for a Unit Root in Panels with Dynamic Factors. Journal of Econometrics, 122(1), 8–126.
 Murray, Ch. J. – Nelson, Ch. R. (2002). The Great Depression and Output Persistence. Journal of Money, Credit and Banking, 34(4), 1090-98.
 Murray, Ch. J. – Nelson, Ch. R. (2004). The Great Depression and Output Persistence: A Reply to Papell and Prodan. Journal of Money, Credit and Banking, 36(3), 429-32.
 Murray, M. P. (1994). A Drunk and Her Dog: An Illustration of Cointegration and Error Correction. The American Statistician, 48(1), 37-39.
 Murthy, V. N. R. – Anoruo, E. (2009). Are Per Capita Real GDP Series in African Countries Non-stationary or Non-linear? What does Empirical Evidence Reveal? Economics Bulletin, 29(4), 2492-504.
 Narayan, P. K. (2005). Are the Australian and New Zealand stock prices nonlinear with a unit root? Applied Economics, 37(18), 2161-66.
 Narayan, P. K. (2008). The purchasing power parity revisited: New evidence for 16 OECD countries from panel unit root tests with structural breaks. Journal International Financial Markets, Institutions and Money, 18(2), 137-46.
 Nelson, Ch. R. – Plosser, Ch. R. (1982). Trend and random walks in macroeconomic time series: Some evidence and implications. Journal of Monetary Economics, 10(2), 139-62.
 Ng, S. – Perron, P. (1995). Unit Root Tests in ARMA Models with Data-Dependent Methods for the Selection of the Truncation Lag. Journal of the American Statistical Association, 90(419), 268-81.
 Ng, S. – Perron, P. (2001). Lag length selection and the construction of unit root tests with good size and power. Econometrica, 69(6), 1519-54.
 Papell, D. H. – Prodan, R. (2004). The Uncertain Unit Root in U.S. Real GDP: Evidence with Restricted and Unrestricted Structural Change. Journal of Money, Credit and Banking, 36(3), 423-27.
 Papell, D. H. – Prodan, R. (2007). Restricted structural change and the unit root hypothesis. Economic Inquiry, 45(4), 834-53.
 Perron, P. – Vogelsang, T. J. (1992). Nonstationarity and level shifts with an application to purchasing power parity. Journal of Business & Economic Statistics, 10(3), 301-20.
 Perron, P. (1989). The great crash, the oil price shock, and the unit root hypothesis. Econometrica, 57(6), 1361-401.
 Perron, P. (1997). Further evidence on breaking trend functions in macroeconomic variables. Journal of Econometrics, 80(2), 355-85.
 Pesaran, M.H. – Smith, L.V. – Yamagata, T. (2009). A Panel Unit Root Test in the Presence of a Multifactor Error Structure. Working paper, Cambridge University.
 Pesaran, M.H. (2007). A Simple Panel Unit Root Test In The Presence Of Cross Section Dependence, Journal of Applied Econometrics, 22(2), 265-312.
 Phillips, P. C. B. – Perron, P. (1988). Testing for a unit root in time series regression. Biometrica, 75(2), 335-46.
 Phillips, P. C. B. (1986). Understanding spurious regressions in econometrics. Journal of Econometrics, 33(3), 311-40.
 Phillips, P.C.B. – Sul, D. (2003). Dynamic Panel Estimation and Homogeneity Testing Under Cross Section Dependence, Econometrics Journal, 6(1), 217-59.
 Quian, X. Y. – Song, F. T. – Zhou, W. X. (2008). Nonlinear behaviour of the Chinese SSEC index with a unit root: Evidence from threshold unit root tests. Physica A: Statistical Mechanics and its Applications. 387(2-3), 503-10.
 Resende, M. – Lima, M. A. M. (2005). Market share instability in Brazilian industry: a dynamic panel data analysis. Applied Economics, 37(6), 713-718.
 Schwarz, G. E. (1978). Estimating the dimension of a model. Annals of Statistics 6 (2), 461–464.
 Schwert, G. W. (1989). Tests for Unit Roots: A Monte Carlo Investigation. Journal of Business & Economic Statistics, 7(2), 147-59.
 Sephton, P. (2008). Market shares and rivalry in the U.S. cigarette industry. Applied Economics Letters, 15(6), 417-22.
 Taylor, A. M. – Taylor, M. P. (2004). The Purchasing Power Parity Debate. Journal of Economic Perspective, 18(4), 135-58.
 Taylor, M, P. – Sarno, L. The behaviour of real exchange rates during the post-Bretton Woods period. Journal of International Economics, 46(2), 281-312.
 Taylor, M. P. – Sarno, L. (1998). The behavior of real exchange rates during the post-Bretton Woods period. Journal of International Economics, 46(2), 281-312.
 Wilcox, D. (1989). The Sustainability of Government Deficits: Implications of the present-value Borrowing Constraint. Journal of Money Credit and Banking, 21(3), 291–306.
 Zivot, E – Andrews, D. W. K. (1992). Further Evidence on the Great Crash, the Oil-Price Shock, ant the Unit-Root Hypothesis. Journal of Business & Economic Statistics, 10(03), 251-270.