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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Improving empirical size of the KPSS test of stationarity

Vol.20, No.1, March , 1–14



  •   (Department of Economics, Sogang University)

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Abstract  

This note proposes a new testing procedure that can alleviate the size problem associated with semiparametric tests of stationarity. The note is focused on The test by Kwiatkowski, Phillips, Schmidt and Shin (1992) considering its popularity in the literature. The testing procedure of this note employs sample-split and the Bonferroni test. The sample is split into two parts, one corresponding to the odd index and the other to the even index, and the KPSS test is applied to each subsample. The two KPSS tests are then combined using the Bonferroni principle. Simulation results demonstrate that this procedure significantly reduces the size distortion of the KPSS test.


Keywords
   stationarity test, size distortion, sample-split, Bonferroni procedure

JEL classification codes
   C32
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