Title: Sign tests for unit root and change in persistence

Authors: Marilena Furno

Addresses: Università degli Studi di Napoli 'Federico II', Via Università 100 Portici (NA), Italy

Abstract: The behaviour of unit root tests defined in terms of sign transform is here analysed. The sign transform allows us to gain robustness to non-normality. Contrarily to the standard unit root tests, our results show that these tests are very reliable in the presence of breaks, provided there is no change in the persistence of a series. In case of change in persistence, the paper proposes to compare sign-based test functions separately computed before and after the change point. A statistically significant difference would signal the presence of change in persistence. An example and a Monte Carlo study conclude the analysis.

Keywords: stationarity; unit root tests; robust procedure; L₁-norm; change in persistence; sign transform; Monte Carlo simulation.

DOI: 10.1504/IJCEE.2014.064763

International Journal of Computational Economics and Econometrics, 2014 Vol.4 No.3/4, pp.269 - 287

Received: 08 May 2013
Accepted: 11 Dec 2013
Published online: 14 Sep 2014 *

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