Abstract
In this paper, we propose a GARCH-based unit root test that is flexible enough to account for, (a) trending variables, (b) two endogenous structural breaks, and (c) heteroskedastic data series. Our proposed model is applied to a range of time-series, trending, and heteroskedastic energy variables. Our two main findings are: first, the proposed trend-based GARCH unit root model outperforms a GARCH model without trend; and, second, allowing for a time trend and two endogenous structural breaks are important in practice, for doing so allows us to reject the unit root null hypothesis.
Original language | English |
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Pages (from-to) | 391-402 |
Number of pages | 12 |
Journal | Energy Economics |
Volume | 50 |
DOIs | |
Publication status | Published - Jul 2015 |
Externally published | Yes |
Keywords
- Energy price
- GARCH
- Structural break
- Trend
- Unit root