Approximate Asymptotic Distribution Functions for Unit-Root and Cointegration Tests

This paper studies the dynamic behaviour of transportation price in Peninsular Malaysia and Sabah from 2004 to 2015 using disaggregated monthly price data of consumer price index (CPI). For that, unit root tests and cointegration tests with structural breaks are incorporated. The findings indicated that (i) both Zivot and Andrews unit root test and Perron unit root test provided fairly similar results; most of the break points occurred in 2008, (ii) the variables cointegrate in the Johansen cointegration test which indicates that there is a long-run relationship and (iii) the Gregory and Hansen test also demonstrated some form of cointegration with structural break(s), especially in 2008. Overall, this study intends to match the structural break points with the comparable critical economic events

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Unit root and cointegration tests on the efficiency and biasedness of forward exchange rates

Journal of Economics and Finance ◽

10.1007/bf02920645 ◽

1993 ◽

Vol 17 (2) ◽

pp. 139-150

Author(s):

C. S. Pyun ◽

Richard D. Evans

Keyword(s):

Exchange Rates ◽

Unit Root ◽

Cointegration Tests

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Explaining India’s current account deficit: a time series perspective

Journal of Asian Business and Economic Studies ◽

10.1108/jabes-11-2018-0089 ◽

2019 ◽

Vol 26 (1) ◽

pp. 117-138

Author(s):

Harendra Kumar Behera ◽

Inder Sekhar Yadav

Keyword(s):

Current Account ◽

Unit Root ◽

Current Account Deficit ◽

Structural Break ◽

Current Account Balance ◽

Fiscal Deficit ◽

Causality Test ◽

Content Type ◽

Financial Account ◽

Cointegration Tests

Purpose The purpose of this paper is to examine the issue of high current account deficit (CAD) from various perspectives focussing its behaviour, financing pattern and sustainability for India. Design/methodology/approach To begin with the trends, composition and dynamics of CAD for India are analysed. Next, the influence of capital flows on current account is investigated using Granger non-causality test proposed by Toda and Yamamoto (1995) between current account balance (CAB) to GDP ratio and financial account balance to GDP ratio. Also, the sustainability of India’s current account is examined using different econometrics techniques. In particular, Husted’s (1992), Johansen’s cointegration and vector error correction model (VECM) is applied along with conducting unit root and structural break tests wherever applicable. Further, long-run and short-run determinants of the CAB are estimated using Johansen’s VECM. Findings The study found that the widening of CAD is due to fall in household financial savings and corporate investments. Also, it was found that a large part of India’s CAD has been financed by FDI and portfolio investments which are partly replaced by short-term volatile flows. The unit root and cointegration tests indicate a sustainable current account for India. Further, econometric analysis reveals that India’s current account is driven by fiscal deficit, terms of trade growth, inflation, real deposit rate, trade openness, relative income growth and the age dependency factor. Practical implications Since India’s CAD has widened and is expected to widen primarily due to rise in gold and oil imports, policy makers should focus on achieving phenomenal export growth so that a sustainable current account is maintained. Also, with rising working-age and skilled population, India should focus more on high-value product exports rather than low-value manufactured items. Further, on the structural side it is important to correct fiscal deficit as it is one of the important factors contributing to large CAD. Originality/value The paper is an important empirical contribution towards explaining India’s CAD over time using latest and comprehensive data and econometric models.

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A POWERFUL TEST OF THE AUTOREGRESSIVE UNIT ROOT HYPOTHESIS BASED ON A TUNING PARAMETER FREE STATISTIC

Econometric Theory ◽

10.1017/s0266466609990247 ◽

2009 ◽

Vol 25 (6) ◽

pp. 1515-1544 ◽

Cited By ~ 13

Author(s):

Morten Ørregaard Nielsen

Keyword(s):

Asymptotic Distribution ◽

Unit Root ◽

Linear Time ◽

Nonparametric Test ◽

Tuning Parameter ◽

Ratio Test ◽

Local Power ◽

Finite Sample ◽

Power Of The Test ◽

The Family

This paper presents a family of simple nonparametric unit root tests indexed by one parameter,d, and containing the Breitung (2002,Journal of Econometrics108, 342–363) test as the special cased= 1. It is shown that (a) each member of the family withd> 0 is consistent, (b) the asymptotic distribution depends ondand thus reflects the parameter chosen to implement the test, and (c) because the asymptotic distribution depends ondand the test remains consistent for alld> 0, it is possible to analyze the power of the test for different values ofd. The usual Phillips–Perron and Dickey–Fuller type tests are indexed by bandwidth, lag length, etc., but have none of these three properties.It is shown that members of the family withd< 1 have higher asymptotic local power than the Breitung (2002) test, and whendis small the asymptotic local power of the proposed nonparametric test is relatively close to the parametric power envelope, particularly in the case with a linear time trend. Furthermore, generalized least squares (GLS) detrending is shown to improve power whendis small, which is not the case for the Breitung (2002) test. Simulations demonstrate that when applying a sieve bootstrap procedure, the proposed variance ratio test has very good size properties, with finite-sample power that is higher than that of the Breitung (2002) test and even rivals the (nearly) optimal parametric GLS detrended augmented Dickey–Fuller test with lag length chosen by an information criterion.

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