Artikel
The power of the 'objective' Bayesian unit-root test
Some researchers, for example, Koop [1], and Sims [2], have advocated for Bayesian alternatives to unit-root testing over the classical approach using the augmented Dickey-Fuller test (ADF). This paper studies the power of what Koop [1] has called the Objective Bayesian approach to unit-root testing. Koop's objective Bayesian test is interesting in light of the call by Phillips [3, 4] for more objective Bayesian analysis of time series. We apply the objective Bayesian unit-root test to a study of long-run purchasing power parity (PPP) in the post-Bretton Woods era and also Monte Carlo simulations. Overall, contrary to the favorable simulation results obtained by Koop [1], our results suggest that the objective Bayesian test is biased in favor of trend-stationarity. We conclude that, at least for the objective Bayesian test, it is not better than the classical ADF approach in unit-root tests, and because of its bias, the objective priors suggested by Koop [1] is not appropriate, and we do not recommend its use.
- Language
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Englisch
- Bibliographic citation
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Journal: The Open Economics Journal ; ISSN: 1874-9194h ; Volume: 2 ; Year: 2009 ; Pages: 71-79 ; Sharjah: Bentham Open
- Classification
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Wirtschaft
Bayesian Analysis: General
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
Foreign Exchange
- Subject
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unit-root test
objective bayesian test
long-run PPP
- Event
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Geistige Schöpfung
- (who)
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Ahking, Francis W.
- Event
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Veröffentlichung
- (who)
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Bentham Open
- (where)
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Sharjah
- (when)
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2009
- DOI
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doi:10.2174/1874919400902010071
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Ahking, Francis W.
- Bentham Open
Time of origin
- 2009
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