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Seasonal unit root tests with seasonal mean shifts

2002; Elsevier BV; Volume: 76; Issue: 2 Linguagem: Inglês

10.1016/s0165-1765(02)00057-5

1873-7374

David I. Harvey, Stephen J. Leybourne, Paul Newbold,

Financial Risk and Volatility Modeling

This paper analyses additive outlier and innovational outlier tests for seasonal unit roots when seasonal mean shifts occur under the null hypothesis. When the magnitude of the breaks is large, simulation evidence reveals that, for three of the four testing procedures considered, the endogenously determined break point can be incorrectly estimated, resulting in spurious rejections of the null. A simple modification to one of the testing approaches is proposed which achieves a substantial improvement in test size.