A fractional Dickey-Fuller test for unit roots

Abstract

This paper presents a new test for fractionally integrated (FI) processes. In particular, it proposes a testing procedure in the time domain that extends the well-known Dickey-Fuller approach. Monte-Carlo simulations support the analytical results derived in the paper and show that proposed tests fare very well, both in terms of power and size, when compared with others available in the literature. The paper ends with two empirical applications.