Testing for near I (2) trends when the signal to noise ratio is small

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Researchers seldom find evidence of I(2) in exchange rates, prices, and other macroeconomics time series when they test the order of integration using univariate Dickey-Fuller tests. In contrast, when using the multivariate ML trace test we frequently find double unit roots in the data. Our paper demonstrates by
simulations that this often happens when the signal-to-noise-ratio is small.
Original languageEnglish
Place of PublicationKbh.
PublisherØkonomisk institut, Københavns Universitet
Number of pages22
Publication statusPublished - 2014
SeriesUniversity of Copenhagen. Institute of Economics. Discussion Papers (Online)
Number01
Volume2014
ISSN1601-2461

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