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The effect of data transformation on common cycle, cointegration, and unit root tests: Monte Carlo results and a simple test

Corradi, V and Swanson, NR (2006) The effect of data transformation on common cycle, cointegration, and unit root tests: Monte Carlo results and a simple test Journal of Econometrics, 132 (1). pp. 195-229.

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Abstract

Cointegration, common cycle, and related tests statistics are often constructed using logged data, even without clear reason why logs should be used rather than levels. Unfortunately, it is also the case that standard data transformation tests, such as those based on Box-Cox transformations, cannot be shown to be consistent unless assumptions concerning whether variables I ( 0 ) or I ( 1 ) are made. In this paper, we propose a simple randomized procedure for choosing between levels and log-levels specifications in the (possible) presence of deterministic and/or stochastic trends, and discuss the impact of incorrect data transformation on common cycle, cointegration and unit root tests. © 2005 Elsevier B.V. All rights reserved.

Item Type: Article
Authors :
NameEmailORCID
Corradi, Vv.corradi@surrey.ac.ukUNSPECIFIED
Swanson, NRUNSPECIFIEDUNSPECIFIED
Date : 1 May 2006
Identification Number : https://doi.org/10.1016/j.jeconom.2005.01.028
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:27
Last Modified : 17 May 2017 14:35
URI: http://epubs.surrey.ac.uk/id/eprint/819759

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