Residual Augmented Fourier ADF Unit Root Test

Yilanci, Veli and Aydin, Mücahit and Aydin, Mehmet (2019): Residual Augmented Fourier ADF Unit Root Test.

Abstract

This paper proposes a residual-based unit root test in the presence of smooth structural changes approximated by a Fourier function. While Fourier Augmented Dickey Fuller test that introduced by Enders and Lee (2012a) allows smooth changes of the unknown form, the Residual Augmented Least Squares procedure use additional higher moment information found in non-normal errors. The test offers a simple way to accommodate an unknown number and form of structural breaks and have good size and power properties in the case of non-normal errors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Non-normal errors, Fourier Function, Unit root.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

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