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MODIFIED KPSS TESTS FOR NEAR INTEGRATION

Published online by Cambridge University Press:  30 January 2007

David Harris ,
Stephen Leybourne  and
Brendan McCabe
David Harris
Affiliation:
University of Melbourne
Stephen Leybourne
Affiliation:
University of Nottingham
Brendan McCabe
Affiliation:
University of Liverpool
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Abstract

This note suggests a simple modification to the Kwiatkowski, Phillips, Schmidt, and Shin (1992, Journal of Econometrics, 54, 159–178) test (KPSS test) so that it is applicable to testing the null hypothesis of near integration against a unit root alternative. The modified KPSS test is shown not to suffer from the asymptotic size distortion problems of the original KPSS test that are described by Müller (2005, Journal of Econometrics 128, 195–213). The test also has good asymptotic and finite-sample properties relative to the point optimal tests of Müller (2005) and Elliott and Müller (2006, Journal of Econometrics 135, 285–310).

Type
NOTES AND PROBLEMS
Information
Econometric Theory , Volume 23 , Issue 2 , April 2007 , pp. 355 - 363
Copyright
© 2007 Cambridge University Press

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References

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