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Testing I(1) against I(d) alternatives with Wald Tests in the presence of deterministic components

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorDolado, Juan José
dc.contributor.authorGonzalo, Jesús
dc.contributor.authorMayoral, Laura
dc.contributor.editorUniversidad Carlos III de Madrid. Departamento de Economía
dc.date.accessioned2007-02-02T09:11:13Z
dc.date.available2007-02-02T09:11:13Z
dc.date.issued2006-12-21
dc.description.abstractThis paper analyses how to test I(1) against I(d), d<1, in the presence of deterministic components in the DGP, by extending a Wald-type test, i.e., the (Efficient) Fractional Dickey-Fuller (EFDF) test, to this case. Tests of these hypotheses are important in many economic applications where it is crucial to distinguish between permanent and transitory shocks because I(d) processes with d<1 are mean-reverting. On top of it, the inclusion of deterministic components becomes a necessary addition in order to analyze most macroeconomic variables. We show how simple is the implementation of the EFDF in these situations and argue that, in general, has better properties than LM tests. Finally, an empirical application is provided where the EFDF approach allowing for deterministic components is used to test for long-memory in the GDP p.c. of several OECD countries, an issue that has important consequences to discriminate between growth theories, and on which there has been some controversy.
dc.format.extent261875 bytes
dc.format.mimetypeapplication/pdf
dc.identifier.issn2340-5031
dc.identifier.repecwe20061221
dc.identifier.urihttps://hdl.handle.net/10016/583
dc.language.isoeng
dc.language.isoeng
dc.relation.ispartofseriesUC3M Working papers. Economics
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España
dc.rights.accessRightsopen access
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.ecienciaEconomía
dc.subject.otherDeterministic Components
dc.subject.otherDickey-Fuller Test
dc.subject.otherFractional Dickey-Fuller Test
dc.subject.otherFractional Processes
dc.subject.otherLong Memory
dc.subject.otherTrends
dc.subject.otherUnit Roots
dc.titleTesting I(1) against I(d) alternatives with Wald Tests in the presence of deterministic components
dc.typeworking paper*
dspace.entity.typePublication
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