Effects of Model Specification on Tests for

Unit Roots in Macroeconomic Data

G. William Schwert

University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research

Journal of Monetary Economics, 20 (July 1987) 73-103

Tests for unit roots in autoregressive models (tests for stationarity) are popular in the macroeconomics literature. Monte Carlo experiments in Schwert [1987] show that unit root tests derived for pure autoregressive processes have different sampling distributions when the true process is a mixed autoregressive-integrated moving average (ARIMA) process. Tests suggested by Said and Dickey [1984,1985], Phillips [1987], Phillips and Perron [1986] and Dickey and Fuller [1979,1981] are applied to a variety of monthly and quarterly macroeconomic time series to illustrate the effects of ARIMA model specification on inferences about stationarity.

Key words: Unit root, Stationarity, ARIMA, Volatility

JEL Classifications: C22

Cited 338 times in the SSCI and SCOPUS through 2014
© Copyright 1987, Elsevier
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