On the Behaviour of Phillips–Perron Tests in the Presence of Persistent Cycles

Abstract

In this paper we provide a detailed analysis of the impact of persistent cycles on the wellknown semi-parametric unit root tests of Phillips and Perron (1988, Biometrika 75, 335-346). It is shown analytically and through Monte Carlo simulations that the presence of complex (near) unit roots can severely bias the size properties of these unit root test procedures.

Selecting the Lag Length for the MGLS Unit Root Tests with Structural Change: A Warning Note for Practitioners Based on Simulations

“…case. Our results are in line with those obtained in Del Barrio Castro et al (2011), Del Barrio Castro et al (2013), and Del Barrio Castro et al (2015 11 .…”

Impacts of external factors on Ethiopia's economic growth: Insights on foreign direct investment, remittances, exchange rates, and imports

“…The study harnessed two robust econometric techniques: fully modified ordinary least squares (FMOLS) and canonical cointegrating regression (CCR), which were specifically employed for robust analysis. Additionally, the Augmented Dickey-Fuller (ADF) [ 100 ] and Phillips-Perron (PP) [ 101 ] tests were employed to assess unit roots in the series, using a significance level of 5 %.…”

“…Predicting macroeconomic data is challenging due to stochastic trends, which must be eliminated before analysis. Projections with such data are unlikely, so the focus is on the specific period being studied [ 101 ]. To ensure reliability, the researcher employs the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) tests.…”