LIMITING POWER OF UNIT-ROOT TESTS IN TIME-SERIES REGRESSION

Dealing with time-series regression where the disturbance term follows an AR(1) process, the limiting powers of some unit-root tests are computed accurately under a sequence of local alternatives. The limiting powers are found to give a good approximation to the finite-sample powers. An extension of the model is also discussed allowing for autocorrelated errors in the AR(1) process. © 1990.