Tests for Unit Roots and the Initial Condition

  title={Tests for Unit Roots and the Initial Condition},
  author={Ulrich Kaiser Bettina M{\"u}ller and G. J. Elliott},
The paper analyzes the impact of the initial condition on the problem of testing for unit roots. To this end, we derive a family of optimal tests that maximize a weighted average power criterion with respect to the initial condition. We then investigate the relationship of this optimal family to popular tests. We find that many unit root tests are closely related to specific members of the optimal family, but the corresponding members employ very different weightings for the initial condition… CONTINUE READING

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