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ABSTRACT:
The purpose of this paper is to characterize three commonly used double unit root tests in terms of their asymptotic local power. To this end, we study a class of nearly doubly integrated processes which in the limit will behave as a weighted integral of a double indexed Ornstein-Uhlenbeck process. Based on a numerical examination of the analytical distributions, a comparison of the tests is made via their asymptotic local power functions.

SUGGESTED CITATION:
Niels Haldrup Prof. and Peter Lildholdt, "Local Power Functions of Tests for Double Unit Roots" (June 5, 2000). Department of Economics, UCSD. Paper 2000-12.
http://repositories.cdlib.org/ucsdecon/2000-12