Gilles Dufrénot: gilles.dufrenot[at]sciencespo-aix.fr
Kiyotaka Sato: sato[at]ynu.ac.jp
The increasing sophistication of economic and financial time series modelling creates a need for a test of the time dependence structure of the series which does not require a proper specifcation of the alternative. Indeed, the latter is unknown beforehand. Yet, the stationarity has to be established before proceeding to the estimation and testing of causal/noncausal or linear/nonlinear models as their econometric theory has been developed under the maintained assumption of stationarity. In this paper, we propose a new unit root test statistics which is both asymptotically consistent against all stationary alternatives and still keeps good power properties in finite sample. A large simulation study is performed to assess the power of our test compared to existing unit root tests built specically for various kinds of stationary alternatives, when the true DGP is either causal or noncausal, linear or nonlinear stationary. Based on various sample sizes and degrees of persistence, it turns out that our new test performs very well in terms of power in fnite sample, no matter the alternative under consideration.