Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society
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Journal of Economic Theory and Econometrics
Journal of the Korean Econometric Society

• In Choi   (Department of Economics, Sogang University)

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