Statistical Papers

, Volume 34, Issue 1, pp 83–88 | Cite as

The size of the nonstationary component and its effect on tests for unit roots

  • P. C. Liu
  • J. Praschnik


We consider a nonstationary time series that is composed of a stationary and nonstationary component. Monte Carlo experiments show that common unit root tests have probabilities of committing a type I error that significantly exceed the level of significance. We find that the probabilities vary according to the relative size of the nonstationary component.


Unit Root Variance Factor Unit Root Test Data Generation Process Monte Carlo Experiment 
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Copyright information

© Springer-Verlag 1993

Authors and Affiliations

  • P. C. Liu
    • 1
  • J. Praschnik
    • 2
  1. 1.Department of EconomicsUniversity of MiamiCoral Gables
  2. 2.Department of EconomicsUniversity of FloridaGainesville

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