Unit-root and stationarity testing with empirical application on industrial production of CEE-4 countries

Lyócsa, Štefan and Výrost, Tomáš and Baumöhl, Eduard (2011): Unit-root and stationarity testing with empirical application on industrial production of CEE-4 countries.

Abstract

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
• Language: English
• 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 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > 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, and General Outlook > E60 - General

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