LAG ORDER AND CRITICAL-VALUES OF A MODIFIED DICKEY-FULLER TEST

This study examines some finite-sample properties of a new modified Di ckey-Fuller test, called the DF-GLS test, which has been shown to be m ore powerful than standard unit-root tests. The study shows the lag or der can significantly affect the critical values of the test. This poi nts to the importance of correcting for the lag order effect in implem enting the DF-GLS test. Approximate lag-adjusted finite-sample critica l values for the DF-GLS test are provided, which can be straightforwar dly computed from response surface equations.