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A NOTE ON THE POWER OF BOOTSTRAP UNIT ROOT TESTS

Published online by Cambridge University Press:  08 January 2003

Anders Rygh Swensen
Anders Rygh Swensen
Affiliation:
University of Oslo
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Abstract

In this note we consider the asymptotic power functions of some bootstrap unit root tests under local alternatives and show that they are in fact the same as for ordinary unit root tests. This is regardless of whether the differences of the observations, i.e., the so-called restricted residuals, or the ordinary least squares residuals are used to construct the resampled observations. We also consider models containing a constant and a linear trend and the DF-GLS tests proposed by Elliott, Rothenberg, and Stock (1996, Econometrica 64, 813–836). A small Monte Carlo experiment is included.I thank the associate editor, Bruce E. Hansen, and three anonymous referees for very constructive comments on the previous versions of the manuscript.

Type
Research Article
Information
Econometric Theory , Volume 19 , Issue 1 , February 2003 , pp. 32 - 48
Copyright
© 2003 Cambridge University Press

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