Testing the order of integration with low power tests. An application to argentine macro-variables

CARRERA, JORGE EDUARDO; FÉLIZ, MARIANO; PANIGO, DEMIAN TUPAC

JOURNAL OF APPLIED ECONOMICS

Universidad del CEMA

Lugar: Buenos Aires; Año: 2003 p. 221 - 246

1514-0326

The low power of available econometric tests is an important problem in applied  research on unit roots and related issues. Based on the principle of  methodological triangulation, the problem should be analyzed from different  points of view in order to increase the validity of the results. Following this  approach a strategy to test the order of integration in time series is presented  using a sequence of eleven consolidated tests. In this way it is possible to  determine the persistence of shocks, to specify the best strategy for  trend-cycle decomposition and to obtain additional information useful for public  policies. As an application of the methodology, the integration properties in  the main 14 Argentine macroeconomic variables are studied. A classification of  them in four homogenous groups according to their order of integration is  obtained.