Testing for Near I(2) Trends When the Signal-to-Noise Ratio Is Small

TY - JOUR

T1 - Testing for Near I(2) Trends When the Signal-to-Noise Ratio Is Small

AU - Juselius, Katarina

N1 - JEL Classification: C1, C18, C22, C32, C52

PY - 2014/5/21

Y1 - 2014/5/21

N2 - Researchers seldom find evidence of I(2) in exchange rates, prices, and other macroeconomics time series when they test the order of integration using univariate Dickey-Fuller tests. In contrast, when using the multivariate ML trace test they frequently find double unit roots in the data. The paper demonstrates by simulations that this often happens when the signal-tonoise ratio is small.

AB - Researchers seldom find evidence of I(2) in exchange rates, prices, and other macroeconomics time series when they test the order of integration using univariate Dickey-Fuller tests. In contrast, when using the multivariate ML trace test they frequently find double unit roots in the data. The paper demonstrates by simulations that this often happens when the signal-tonoise ratio is small.

U2 - 10.5018/economics-ejournal.ja.2014-21

DO - 10.5018/economics-ejournal.ja.2014-21

M3 - Journal article

SN - 1864-6042

VL - 8

SP - 1

EP - 30

JO - Economics

JF - Economics

IS - 2014-21

M1 - 2014-21

ER -