Multiple unit root tests under uncertainty over the initial condition: some powerful modifications

Abstract

Wemodifytheunion-of-rejectionunitroottestofHarveyetal.UnitRoot Testing in Practice: Dealing with Uncertainty over the Trend and Initial Condition (Harvey,EconomTheory25:587-636,2009).Thistestrejectsifeitheroftwodifferent unit root tests rejects but controls the inherent multiple testing issue by suitably mod- ifying the critical values to ensure the desired null rejection probability. We evaluate the new tests' power relative to existing ones' and to the Gaussian asymptotic power envelope. An empirical application illustrates the usefulness of the new statistics.