Tests for unit roots: A Monte Carlo investigation (Reprinted)

Recent work by Said and Dickey (1984, 1985), Phillips (1987), and Phillips and Perron (1988) examines tests for unit roots in the autoregressive part of mixed autoregressive integrated moving average models (tests for stationarity). Monte Carlo experiments show that these unit-root tests have different finite-sample distributions from the unit-root tests developed by Fuller (1976) and Dickey and Fuller (1979, 1981) for autoregressive processes. In particular, the tests developed by Phillips (1987) and Phillips and Perron (in press) seem more sensitive to model misspecification than the high-order autoregressive approximation suggested by Said and Dickey (1984).