Traditional Unit Root Tests Inaccurate for Trend and Cycle Models
Unit root tests, like the one by Dickey and Fuller, are commonly used to check if a series follows a random walk pattern with a stationary part. This test is often applied to separate trends and cycles in data. The study looked at how the Dickey and Fuller test performs under this broader null hypothesis. The research found that the standard tables for the Dickey and Fuller test are not suitable in this context.