Aggregation and unit roots in economic time series

TitleAggregation and unit roots in economic time series
Publication TypeMiscellaneous
Year1998
AuthorsHornok, A., and L. Mátyás
Languageeng
Abstract

This paper analyses the e ects of aggregation on testing the null hypothesis of unit root in time series. It shows that when an economic time series is derived through the aggregations of several individual time series, the usual Dickey-Fuller and Phillips-Perron tests can be misleading. Here an alternative test is introduced which explicitly takes into account the behaviour of the individual series. We derive the theoretical distribution of the new test under quite general conditions and give some simulated critical values as well. 1.