F Versus T Tests for Unit Roots

Economics Bulletin, Vol. 3, No. 3 pp. 1-6, 2001

7 Pages Posted: 12 Feb 2001 Last revised: 9 Jul 2008

See all articles by John Elder

John Elder

Colorado State University

Peter E. Kennedy

Simon Fraser University (SFU) - Department of Economics

Date Written: Febuary 2001

Abstract

F tests which test jointly for a unit root and a zero intercept, and so compete against Dickey-Fuller t tests, are shown not to enhance power because they are invariant to the intercept value in the absence of a unit root. Monte Carlo results in the literature that indicate otherwise are shown to have resulted from the use of special starting values. Testing procedures that employ these F tests to enhance power should be revised by omitting them.

Keywords: Unit root tests, Dickey-Fuller tests, Power

JEL Classification: C22, G14

Suggested Citation

Elder, John and Kennedy, Peter E., F Versus T Tests for Unit Roots (Febuary 2001). Economics Bulletin, Vol. 3, No. 3 pp. 1-6, 2001, Available at SSRN: https://ssrn.com/abstract=258952 or http://dx.doi.org/10.2139/ssrn.258952

John Elder (Contact Author)

Colorado State University ( email )

Dept of Finance & Real Estate
1272 Campus Delivery
Fort Collins, CO 80523
United States
970-491-2952 (Phone)

HOME PAGE: http://lamar.colostate.edu/~jelder

Peter E. Kennedy

Simon Fraser University (SFU) - Department of Economics ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada
604-291-4516 (Phone)

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