TESTING FOR A UNIT-ROOT BY FREQUENCY-DOMAIN REGRESSION

Frequency domain tests for the presence of a unit root are developed. Their limit distributions are derived under the assumption of weakly s tationary errors and are free of nuisance parameters. Results on test consistency are also reported. Monte Carlo simulations are performed t o study the size and power of the proposed tests in finite samples. Th e computations indicate that the frequency domain tests have stable si ze and good power in finite samples for a variety of error-generating mechanisms. We conclude that the frequency domain tests have some good performance characteristics in relation to time domain procedures, al though they are also susceptible to size distortion when there is nega tive serial correlation in the errors.