Robustness of unit root tests when the series are I(2)

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2003-6-1

Author

Akdi, Yılmaz
Kıvılcım , Metin Özcan
Yalçın, Yeliz

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This paper examines the testing for unit roots when the macroeconomic series are integrated of order two, I(2), rather than of order one, I(1). Via an example we demonstrate that neither the Augmented Dickey-Fuller test, nor the autocorrelation and partial autocorrelation functions are robust in the presence of double unit roots. Empirically, the Dickey-Pantula sequential unit root method indicates that the Turkish money stock, GNP, and price data are I(2), while autocorrelation and partial autocorrelation functions provide evidence in favor of I(1). The paper thus recommends that the possibility of I(2)-ness should be seriously considered in econometric modeling.

Subject Keywords

Robustness, Unit root tests, Dickey-Pantula

URI

http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/22
https://hdl.handle.net/11511/58522

Journal

ODTÜ Gelişme Dergisi

Collections

Department of Economics, Article

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Citation Formats

Y. Akdi, M. Ö. Kıvılcım, and Y. Yalçın, “Robustness of unit root tests when the series are I(2),” ODTÜ Gelişme Dergisi, vol. 30, no. 1, pp. 19–34, 2003, Accessed: 00, 2020. [Online]. Available: http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/22.