Boundary and Sign Problems of Parameters along with its Solutions of the Augmented Dickey-Fuller Test

Gowranga Kumar Paul; Shayla Naznin; Ajit kumar Majumder

Boundary and Sign Problems of Parameters along with its Solutions of the Augmented Dickey-Fuller Test

Gowranga Kumar Paul *

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Shayla Naznin

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Ajit kumar Majumder

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Boundary and Sign Problems of Parameters along with its Solutions of the Augmented Dickey-Fuller Test

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Abstract

Usual test of testing unit root such as Dickey-Fuller (DF), Augmented Dickey-Fuller (ADF), Phillips Perron etc ignores sign and boundary of parameters. In this paper, we demonstrated the ignorance of sign and boundary of parameters and consequences of this ignorance in estimation and testing by Monte Carlo Simulation. Our main objective is to develop a method to capture the non-stationarity keeping in mind the boundary and sign problem and to develop the restricted ADF test based on ESS using the constraint estimate of parameters. We compare the power properties of the usual ADF test and ADF test with restricted error sum of squares using the constraint estimate of parameters by Monte Carlo Simulation and we find that the proposed ADF test gives better result than the usual ADF test in terms of power properties.

References

3 Cites in Article

Reference Format

A Akter (2009). On the Sign and Boundary Problems in Unit Root and Modified Dickey-Fuller Type Test for Testing Unit 4.
Peter Brockwell,Richard Davis (1996). Multivariate Time Series.
D Gujarati (2003). Basic Econometrics.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Gowranga Kumar Paul, Shayla Naznin, Ajit kumar Majumder. 2014. "Boundary and Sign Problems of Parameters along with its Solutions of the Augmented Dickey-Fuller Test". Global Journal of Science Frontier Research - F: Mathematics & Decision GJSFR-F Volume 14 (GJSFR Volume 14 Issue F5).

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GJSFR Volume 14 Issue F5

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Journal Specifications

Crossref Journal DOI 10.17406/GJSFR

Print ISSN 0975-5896

e-ISSN 2249-4626

Keywords

Optimization power of the test restricted ADF test Simulation stationarity test

Classification

GJSFR-F Classification JEL Code: C12

C13

C15

Submission ReceivedAugust 4, 2014
Peer Review Double Blind
Handling Editor
Accepted September 3, 2014
Published September 17, 2014

Version of record

v1.2

Issue date

October 7, 2014

Language

English

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Article Matrices

Total Score: 147

Country: Bangladesh

Subject: Global Journal of Science Frontier Research

Authors: Shayla Naznin, Gowranga Kumar Paul, Ajit kumar Majumder (PhD/Dr. count: 0)

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Publish Date: 2014 09, Wed

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Total Views: 1.2K

Total Downloads: 54

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