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The Performance of Lag Selection and Detrending Methods for HEGY Seasonal Unit Root Tests

del Barrio Castro, Tomás and Osborn, Denise R and Taylor, AM Robert (2016) 'The Performance of Lag Selection and Detrending Methods for HEGY Seasonal Unit Root Tests.' Econometric Reviews, 35 (1). pp. 122-168. ISSN 0747-4938

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Abstract

This paper analyzes two key issues for the empirical implementation of parametric seasonal unit root tests, namely generalized least squares (GLS) versus ordinary least squares (OLS) detrending and the selection of the lag augmentation polynomial. Through an extensive Monte Carlo analysis, the performance of a battery of lag selection techniques is analyzed, including a new extension of modified information criteria for the seasonal unit root context. All procedures are applied for both OLS and GLS detrending for a range of data generating processes, also including an examination of hybrid OLS-GLS detrending in conjunction with (seasonal) modified AIC lag selection. An application to quarterly U.S. industrial production indices illustrates the practical implications of choices made.

Item Type: Article
Uncontrolled Keywords: Data-based lag selection; HEGY tests; OLS and GLS detrending; Seasonal unit root
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
Q Science > QA Mathematics
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 11 Nov 2014 10:43
Last Modified: 15 Jan 2022 00:47
URI: http://repository.essex.ac.uk/id/eprint/11234

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