Unit roots, cointegration and structural change (paperback version) Themes in Modern Econometrics Series

Time series analysis has undergone many changes during recent years with the advent of unit roots and cointegration. This textbook is based on successful lecture programme and provides a comprehensive review of these topics as well as of structural change.

Part I. Introduction and Basic Concepts: 1. Introduction, 2. Basic concepts, 2.1 Stochastic processes, 2.2 Some commonly used stationary models, 2.2.1 Purely random process, 2.2.2 Moving-average (MA) processes, 2.2.3 Autoregressive (AR) processes, 2.2.4 Autoregressive moving-average (ARMA) processes, 2.3 Box-Jenkins methods, 2.4 Integrated variables and cointegration, 2.5 Spurious regression, 2.6 Deterministic trend and stochastic trend, 2.7 Detrending methods, 2.8 VAR, ECM and ADL, 2.9 Unit root tests, 2.10 Cointegration tests and ECM, 2.11 Summary, Part II. Unit Roots and Cointegration: 3. Unit roots, 3.1. Introduction, 3.2 Unit roots and Wiener processes, 3.2.1 Wiener processes: some definitions, 3.2.2 Some basic results on Wiener processes, 3.2.3 Relationships with normal distributions, 3.2.4 Scaling factors in asymptotic distributions, 3.3 Unit root tests without a deterministic trend, 3.3.1 Some historical notes, 3.3.2 The Dickey-Fuller distribution, 3.3.3 Computation of critical values, 3.4 DF test with a linear deterministic trend, 3.4.1 Models with drift, 3.4.2 Models with linear trend, 3.4.3 An illustrative example, 3.5 Specification of deterministic trends, 3.6 Unit root tests for a wide class of errors, 3.6.1 Changing the estimating equations: the ADF test, 3.6.2 Choice of lag-length in the ADF test, 3.6.3 Modifications of the test statistic: Phillips-Peron test, 3.6.4 A comparison of the two approaches, 3.7 Sargan-Bhargava and Bhargava tests, 3.8 Variance ratio tests, 3.9 Tests for TSP vs. DSP, 3.10 Forecasting from trend stationary vs. difference stationary time series, 3.11 Summary and conclusions, 4. Issues in unit root testing, 4.1 Introduction, 4.2 Size distortions and lower power of unit root tests, 4.3 Solutions to the problems of size and power, 4.3.1 LR tests in ARMA models, 4.3.2 IV tests in ARMA models, 4.3.3 Other IV based tests - Durbin-Hausman tests, 4.3.4 Modifications of the Phillips-Perron (PP) tests, 4.3.5 Forward and reverse Dickey-Fuller regressions, 4.3.6 Weighted symmetric estimators, 4.3.7 DF-GLS test, 4.4 Problems of over-differencing: MA roots, 4.5 Tests with stationarity as null, 4.5.1 KPSS tests, 4.5.2 Leybourne and McCabe test, 4.5.3 Some other tests, 4.5.4 Some general comments, 4.6 Confirmatory analysis, 4.7 Frequency of observations and power of unit root tests.