Topic: Contributions on nonstationary time series and panels Title: New results on the power of some tests for a fixed unit root under a stochastic unit root alternative Authors:  Julio Angel Afonso-Rodriguez - University of the Balearic Islands (Spain) [presenting]
Abstract: The nonstationary behaviour of some macroeconomic and financial time series seems to be not well characterized by the standard unit root process. Within the class of nonlinear unit root processes, we concentrate on the so-called stochastic (or randomized) unit root (STUR) process which introduces an additional persistent component that could explain some of the conflicting empirical results arising when testing for the null of a fixed unit root against a stationary alternative, and nests two different nonstationary alternatives to the standard fixed unit root process such as the pure STUR and the bilinear unit root (BLUR) processes. By introducing general assumptions about serially and mutually correlated errors and a proper normalization of the parameter governing the effect of the additional component, we study the power properties of a great variety of parametric and semiparametric tests for the null of a fixed unit root against the alternatives of stationarity and nonlinear nonstationarity, as well as for some tests for the null of stationarity. We obtain some new results that could explain the apparent conflicts arising when combine the outcomes of some of these complementary testing procedures, and propose an alternative testing procedure to discriminate between a fixed unit root against any of these two sources of nonlinear nonstationarity, incorporating a semiparametric correction for serially correlated errors with good size and power properties.