An Alternative to Unit Root Tests : Bridge Estimators Differentiate between Nonstationary versus Stationary Models and Select Optimal Lag

@inproceedings{Caner2011AnAT,
  title={An Alternative to Unit Root Tests : Bridge Estimators Differentiate between Nonstationary versus Stationary Models and Select Optimal Lag},
  author={Mehmet Caner and Keith Knight},
  year={2011}
}
This paper introduces a novel way of differentiating a unit root from stationary alternatives using so-called “Bridge” estimators; this estimation procedure can potentially generate exact zero estimates of parameters. We exploit this property and treat this as a model selection problem. We show that Bridge estimators can select the correct model with probability tending to 1. They estimate ”zero” parameter on the lagged dependent variable as zero (nonstationarity), if this is nonzero… CONTINUE READING