Professional Documents
Culture Documents
Gabriel Rodrguez
Ponticia Universidad Catlica del Per
Motivation (1)
Random Walk (No Drift)
15
10
5
0
-5
-10
-15
-20
-25
250
500
750
1000
Ago-08
Feb-08
Ago-07
Feb-07
Ago-06
Feb-06
Ago-05
Feb-05
Ago-04
Feb-04
Ago-03
Feb-03
Ago-02
Feb-02
Ago-01
95.0
e2
En 1
e2
En 3
e2
En 5
e2
En 7
e2
En 9
e3
En 1
e3
En 3
e3
En 5
e3
En 7
e3
En 9
e4
En 1
e4
En 3
e4
En 5
e4
En 7
e4
En 9
e5
En 1
e5
En 3
e5
En 5
e5
En 7
e5
En 9
e6
En 1
e6
En 3
e6
En 5
e6
En 7
e6
En 9
e7
En 1
e7
En 3
e7
En 5
e7
En 7
e7
En 9
e8
En 1
e8
En 3
e8
En 5
e8
En 7
e8
En 9
e9
En 1
e9
En 3
e9
En 5
e9
En 7
e9
En 9
e0
En 1
e0
En 3
e0
En 5
e07
En
Motivation (2)
500
400
300
200
100
0
250
500
3
750
1000
120
100
80
60
40
20
Motivation (3)
35
30
25
20
15
10
5
0
-5
25
50
75
Y_AR_0.5
Y_AR_0.98
Y_RANDOM_WALK
100
Y_AR_0.97
Y_AR_0.99
Outline
Basic References: Campbell and Perron (1991), Stock (1994), Phillips
and Xiao (1999), Maddala and Kim (2000), Haldrup and Jansson (2006)
Data Generating Process
Classical Unit Root Statistics
Other Unit Root Statistics
Recent Unit Root Statistics
Some Issues on Unit Roots
Structural Change and Unit Roots
The Role of the Initial Condition and Unit Roots
Covariates and Unit Roots
Additive Outliers and Unit Roots
Further Issues and/or Limitations of this Survey
(1)
(2)
yt = dt + ut ; t = 1; :::; T;
ut = u t 1 + vt ;
u0 = 0 (initial condition);
P1
P
vt = 1
i=0 ij i j < 1 and where f t g is a martingale
i=0 i t i with
dierence sequence;
vt has a non-normalized spectral density
zero given by
P at frequency
2
2
);
E(
= 2 (1)2 ; where 2 = limT !1 T 1 1
t
t=1
Under H0 , Functional Central Limit Theorem (FCLT) says: T
W (r); W (r) is a standard Wiener process.
dt =
H0 :
= 1;
Local-to-unity framework:
1=2
P[rT ]
t=1
vt )
4
4.1
yt =
Assume that vt
distributions are
T (b
i:i:d:(0;
zt + yt
+ vt :
(3)
R
W (r)dW
0:5[W (1)2 1]
R
1) ) R
=
;
W (r)2 dr
W (r)2 dr
R
W (r)dW
0:5[W (1)2 1]
R
=
:
tb ) R
[ W (r)2 dr]1=2
[ W (r)2 dr]1=2
(4)
(5)
If
or zt = f1; tg, then W is replaced by W i = W (r)
R zt = f1g
W Z(ZZ 0 ) 1 Z(r), for i = ; . W i is the projection of W onto the
space orthogonal to z.
Asymptotic critical values at 5.0% are: -1.94, -2.86, -3.43 for zt = f;g,
zt = f1g and zt = f1; tg; respectively.
4.2
where
=(
0:5[W (1)2 1] +
R
;
W (r)2 dr
f0:5[W (1)2 1]g +
R
)
;
2
1=2
v [ W (r) dr]
1) )
(6)
tb
(7)
2
2
v )=2 :
zt +
0 yt
1+
k
X
bi y t
(8)
i=1
where
1: Then, H0 :
= 0:
b 0 zt , then (8) is
et 1
0y
If k ! 1; k 3 =T ! 0; then, T (b
(4) and (5).
k
X
i=1
bi yet
(9)
4.3
= s =T
w( ; k) = 1
k+1
vbt2
+ 2T
k
X
=1
w( ; k)
T
X
t= +1
Zt
0:5(s2 sb2v )
P
T 2 Tt=2 yt2 1
0:5[W (1)2 1]
R
;
)
W (r)2 dr
sbv
0:5(s2 sb2v )
= ( )t b
P
s
[T 2 Tt=2 yt2 1 ]1=2
= T (b
1)
0:5[W (1)2 1]
R
:
[ W (r)2 dr]1=2
(12)
(13)
10
4.4
The M-Statistics
References: Stock (1999), Perron and Ng (1996).
Denitions:
MZ
T
2T
M SB = [
M Zt =
1 2
y~T s2
;
P
T
2
2
y
~
t
1
t=1
PT 2
2
~t 1 1=2
t=1 y
] ;
s2
[4s2 T
1 2
y~T
P
T
2
t=1
s2
y~t2 1 ]1=2
(14)
(15)
;
(16)
P
0
where: y~t = yt ^ zt , s2 = s2ek =[1 ^b(1)]2 , s2ek = Tt=k+1 e^2tk , ^b(1) =
Pk ^
j=1 bj , obtained from the autoregression (9).
(M SB):
11
4ijD 1
E1 4F
PJACT Si'E
200
Sc4/t'e r 4Rt4 1,
flOLL
nt
zt
cOL,19
o `it?!
=
fizo
o
= 0.5
1 35i2I
i oo5sJ
o
o. oo9
O Lif/
o.019
o o
5ouC
10.033
o oS?
031
011LQ
o
z 0!
o.o103J
tO
=0.0
o $101
6o60
o.023
LCSO
cO 72
o0i5
4A1 AJ
00q2
/T9&
/
5
5.1
1=2
u[T r] )
= 1 + c=T:
L)yt ]; t = 2; ::::; T;
L)zt ]; t = 2; :::::; T;
(17)
(18)
S( ) = (yt
12
zt )0 (yt
zt ):
(19)
^0
GLS zt :
All unit root statistics may be used with yet . For the ADF, see ERS
(1996) and for the M-statistics, see Ng and Perron (2001).
When zt = f1g and zt = f1; tg, the limiting distributions are:
0:5[Wc (1)2 1]
R
;
[ Wc (r)2 dr]1=2
0:5[Vc;c (1)2 1]
) R
;
[ Vc;c (r)2 dr]1=2
DF GLS )
(20)
DF GLS
(21)
R
) rWc (r)dr,
13
5.2
PTGLS (c; c) =
S( )
S(1)
s2
(22)
where S( ) and S(1) are the sums of squared errors from GLS regressions with = and = 1, respectively.
Limiting distributions:
GLS
PT;
(c; c)
GLS
PT;
(c; c)
) c
) c
Wc (r)2 dr
cWc (1)2 ;
(23)
(24)
14
6.1
(c) = Pr[H PT
(c; c) < b
PTGLS
(c)];
(25)
Pr[H PT
with
(0; c) < b
PTGLS
(c)] = ;
15
(26)
6.2
= Pr[H J
GLS
(c; c) < bJ
GLS
(c)];
GLS
16
(c)
gis
r
e
w
L
It
e,
28
:8
o
E',.
a
O
`o
E
it
O!
o
o
o
4
&
2
-c
f.n:,c
2t
24
32
6.3
(27)
kbic
(28)
where
^T (k) =
(s2ek ) 1 b 20
CT [^T (k) + k]
T
T
X
t=1
yet2 1 :
(29)
(30)
17
6.4
18
Sinl 77
`7
+00
bUi JY
03 /
0O
oO
OTI
oto &i/
Q&'Q
LiGO
060
Z5C
LOO
5791QV
jQ
cli
vYW
03
QO
jO
bo o
Yo
h&Q
ECO
hO
oVo
zoo
oG
oi wny5
080
Yo
800
go
o
oo
co
00/
?0
Z2
9O0
?v
01!
oo
900
bAO
A/o
ozo
001
oQ
?`O-
QY2
9j
`4 vii
1e
.1
7SV VV3fj7&
/-9
?JJIYJ
ouWd5r
=`
Qj/2l
7U.SiLLS
*oo =1
vv ?
7
7.1
TB )g;
where 1(:) is the indicator function and TB is the break point. Assume
that TB = T , for some 2 (0; 1):
Perron (1989)
Christiano (1992)
Zivot and Andrews( 1992)
19
92
- -
881
s64
84-4
62
76
74
72
68
66
4
62
6
-----------`---
90'3
732
&3
933
940
Lajr.}n .f
Kl
19W
1973
960
Nott:nt1 V.Lgc.
8 2ai
757'-i
-/
73
72
`1
69
95C
.955
r65
9.'
.e4e
975
Note Tse br,kcn `L:a;gZ; l.nc ji al ,J trtnd `o' 01.5 of sic Sim.
D70:!973:i.o, lE'-. Tifr>H!.!- *
-tu
2.-i_.gar:lt
Kj
es
, -
DT
1/
//
25
t <'
.7
Ir
SCE
80
7228
3r; 34O
Sic tren.
01.5 o! cc 5
h,r;cL%D7Or7ctaruL rL-.DT-I:r,,:97
.;;
Logan;
.;
C.
tiaton
Sock 5
"t,.
tt
973
O
;crc
Mo't SIOC
VeIoc.ty
02 34*10*3411
2,
-
3 -*33310 tabIlo.3
f----100.l-&*
7.'2I'
r_v
"::::: :: ::
hiUd_
//
`&%CV
,qS
`*04
91*3
IC6,i It
1044
`956
1944
361 0
1660
1090
`9033
`930
1920
1040
1840
33,0
1*60
Vea,
61.1,.,,.
l,,r-/ f4ea
jij
-`
6-';
7.5
_1
II 3J'
1171.-.-.-
31*3*
`3330
Ye.3,
L-c'rr.:',c''
Real
S1-lE'r,:es
lodo
y.,11-'Il
`.`.-
qe
1
4-4
50111013 1% C.C
42
.0111,:,
1933
`541
--".*.-,0
119111963
1103
Italo IIbS'OOO'
A,VllWIOl3t
0910
lI;
lOo
943
Vea
Vea,
2 cco,h,wedl
TItl,.lit
`969
7.2
0:5K1 (c; c; )
K2 (c; c; )
(K2 (c; c; ))1=2
0:5K1 (c; c; )
M SB GLS ( ) )
M ZtGLS ( ) )
ADF GLS ( ) )
H M Z (c; c; );
H M SB (c; c; );
(31)
(32)
1=2
H M Zt (c; c; );
(33)
1=2
H ADF (c; c; );
(34)
(K2 (c; c; ))
0:5K1 (c; c; )
(K2 (c; c; ))
where:
(1)
(2)
What does happen with the Model I with GLS Detrended data? Reference: Rodrguez (2007)
20
7.3
2(0;1)
(35)
2(0;1)
Method 2: Choose the break point such that the absolute value of the
t-statistic on the coe cient of the change in slope is maximized; see
Perron (1997):
^ = arg max jtb ( )j;
2
2(";1 ")
2(";1 ")
1=2
3 )j
21
):
(36)
7.4
is unknown:
GLS
PT;
(c; c) = f inf
2[";1 "]
S( ; )
inf
2[";1 "]
S(1; )g=s2 :
(37)
Limiting distribution:
GLS
PT;
(c; c) )
sup M (c; 0; )
2[";1 "]
2c
Wc (r)dW (r) + (c
PTGLS
2cc)
Wc (r)2 dr
(38)
(c; c):
sup M (c; c; )
2[";1 "]
22:5)
22
24
Figure 1: Gaussian Local Power Envelope and the Local Asymptotic Power Functions
of the Tests
0:5g1 (c; c; )
g2 (c; c; )
J MZ
GLS
J M SB
(c; c; )
GLS
GLS
J M Zt
J ADF
(c; c; )
(c; c; )
GLS
(c; c; )
24:
Figure 1. Gaussian Power Envelope and Asymptotic Power Functions; Inmum Method
and Fixed and Random Initial Condition.
[1
L]uy;t
ux;t
= 1 + cT
A (L) ut ( ) = et
1
(39)
(40)
(41)
(42)
where xt , an m 1 vector, is an arbitrary number of stationary covariates containing extra information of yt , the variable to be tested.
is dened as the spectral density at the frequency zero (scaled by 2 )
of ut ( ). Therefore R2 = ! yy1 ! yx xx1 ! 0yx is a measure of the long-run
correlation between shocks to xt and quasi-dierences of yt at the frequency zero. The value of R2 represents the contribution of covariates
to the explanation of yt , and the value of R2 ranges from zero to unity.
27
P (1; ) =
inf
2(0;1)
inf
2(0;1)
T
X
u^it ( ; )0
1 i
u^t (
u^it (1; )0
1 i
u^t
; )
t=1
T
X
(1; )
c:
(43)
t=1
dt (r)0 ^ and r = ; 1:
1 (c; c; R
)+
i
2 (c; c;
; R2 )
(44)
The asymptotic power depends on c, which corresponds to one particular point under the alternative hypothesis.
The distribution of the P i (1; ) test also depends on the parameter R2 :
When R2 = 0; there is no covariate correlated with the quasi-dierences
of yt and consequently we retrieve the same asymptotic distribution as
that derived in Perron and Rodrguez (2003). When R2 is greater than
zero, the limiting distribution is a function of R2 , indicating that extra
information contained in the covariates may make a dierence on the
performance of the test.
28
29