Impact of Model Specification Decisions on Unit Root Tests

Performance of unit tests depends on several specification decisions prior to their application e.g., whether or not to include a deterministic trend. Since there is no standard procedure for making such decisions, therefore the practitioners routinely make several arbitrary specification decisions. In Monte Carlo studies, the design of DGP supports these decisions, but for real data, such specification decisions are often unjustifiable and sometimes incompatible with data. We argue that the problems posed by choice of initial specification are quite complex and the existing voluminous literature on this issue treats only certain superficial aspects of this choice. We also show how these initial specifications affect the performance of unit root tests and argue that Monte Carlo studies should include these preliminary decisions to arrive at a better yardstick for evaluating such tests.model specification, trend stationary, difference stationary

Most Stringent Test for Location Parameter of a Random Number from Cauchy Density

We study the test for location parameter of a random number from Cauchy density, focusing on point optimal tests. We develop analytical technique to compute critical values and power curve of a point optimal test. We study the power properties of various point optimal tests. The problem turned out to be different in its nature, in that, the critical value of a test determines the power properties of test. We found that if for given size  and any point m in alternative space, if the critical value of a point optimal test is 1, the test optimal for that point is the most stringent test.Cauchy density, Power Envelop, Location Parameter, Stringent Test

Impact of Model Specification Decisions on Unit Root Tests

Performance of unit root tests depends on several specification decisions prior to their application, e.g., whether or not to include a deterministic trend. Since there is no standard procedure for making such decisions; therefore, the practitioners routinely make several arbitrary specification decisions. In Monte Carlo studies, the design of data generating process supports these decisions, but for real data, such specification decisions are often unjustifiable and sometimes incompatible with data. We argue that the problems posed by choice of initial specification are quite complex and the existing voluminous literature on this issue treats only certain superficial aspects of this choice. Outcomes of unit root tests are very sensitive to both choice and sequencing of these arbitrary specifications. This means that we can obtain results of our choice from unit root tests by varying these specifications.Model Specification, Trend Stationary, Difference Stationary

K. G. Karmakar. Rural Credit and Self-help Groups—Micro-finance Needs and Concepts in India. New Delhi: Sage Publications, 1999. 374 pages. Hardbound. India Rs 465.00.

Inadequacy of capital results in inefficient utilisation of resources in the rural areas. It does not only impact negatively on national economic growth but also proves to be instrumental in keeping the poor trapped in poverty as formalised traditional capital markets remain beyond the reach of the poor. In such cases, then, micro-financing services offer the best solution to the aforementioned problem. It is encouraging to note that micro-financing is being recognised as a powerful tool in alleviating poverty and promoting growth and development at the grassroots level

Suresh Chandra Babu and Ashok Gulati. Economic Reforms and Food Security: The Impact of Trade and Technology in South Asia. New York: Food Products Press, 2005. 483 pages. Price not given.

This book covers a wide range of issues relating to food security (in order of hierarchy) including the globalisation and liberalisation of trade, the WTO Agreement on Agriculture and Intellectual Property Rights, market reforms, technological options, diversification and research needs, water security, and household food security. Further, recommendations are made to cope with challenges of food insecurity. The authors emphasise the need of continuity of the current trend of reforms and devising new policies for the agricultural, food, and natural resources sectors. The issues of poverty, food insecurity, and malnutrition are being faced across South Asia. These are important not only on economic grounds but also on ethical grounds. The volume’s twenty one chapters, divided into seven parts, have been contributed by twenty-nine experts. Part I discusses economic reforms, trade, technology, and food security. The authors analyse food security situation in the region in the longrun perspective and discuss policy imperatives to cope with this challenge. Among the recommendations, are the need for investment in human resources, improvement in rural infrastructure, development of pro-poor technologies, and promotion of regional cooperation

J. V. Vilanilam. More Effective Communication: A Manual for Professionals. New Delhi: Sage Publications, 2000. 238 pages. Paperback. Indian Rs 175.00.

The book under review—“More Effective Communication: A Manual for Professionals”, is a good effort by J. V. Vilanilam and is a useful addition to the modern literature on communication skills. J. V. Vilanilam’s book is for professionals who need to make their communication more effective, and is written in a simple and easily understandable style. The reader finds some very useful ways to improve his/her English for written/oral communication. The reader can gain an insight into communication skills step by step with the help of examples, diagrams, photographs, in-boxes exercises, etc. The appendices also contain useful material about some words commonly confused and identify their correct usage. The book is divided into seven chapters and four appendices. Chapter One highlights the importance of communication in the present era and explains the role of communication and the importance of languages in the management of organisations

Shirley A. White et al. The Art of Facilitating Participation: Realising the Power of Grassroots Communication. New Delhi: Sage Publications, 1999. Indian Rs 250.00. 367 pages.

Participatory development has gained considerable recognition and popularity in recent years as conventional approaches have been unable to tackle the widening disparities between scarce resources and endless needs and shorten the rich-poor gap. Their failure is traced to lack of participation of the beneficiaries. Shirley A. White, the editor of this volume, has used contributions from a number of authors who describe their experience in facilitating participation through its major components. The book is divided into three parts: the Art of Activation, the Art of Technique, and the Art of Building Community. The experiences of the authors are in a variety of areas—from facilitation to synergising participation, from catalyst communication to participatory rural communication appraisal, from participatory research to the participatory action research, from participatory rural appraisal to participatory learning, from the use of statistics in participatory development to use of the Internet and community radio in rural development, from role of women in agriculture to children in participatory research and so on. The book also tells a number of success and failure stories across the continents under world organisations like the USAID, UNDP, FAO, UNICEF, WHO, UNESCO, SIDA and others

Model specification, observational equivalence and performance of unit root tests

In this paper we highlight the necessity of new criteria for evaluation of performance of unit root tests. We suggest focusing directly on the reasons that create ambiguity in unit root test’s results. Two reasons for unsatisfactory properties of unit root tests can be found in the literature (i) the model misspecification and (ii) observational equivalence. Regarding first reason, there is immense literature on several components of model specification covering specification techniques, consequence of misspecification and robust methods. However complete model specification involves multiple decisions and most of studies on performance of unit root tests do not address issue of multiple specification decisions simultaneously. The Monte Carlo studies are conditional on some of implicit specification and for Monte Carlo; these specifications are by construction valid. But for real data, the implicit decisions are often not true and specification decisions need to be endogenized. A closer match with real case is possible if multiple specification decisions are endogenized, thus providing more reliable measure of performance of unit root tests. Second problem in differentiating trend and difference stationary process is the observational equivalence between two processes. We suggest exploring data generating processes with different long run dynamics and small sample equivalence so that a researcher should have an idea about other plausible models for a data set for which he has estimated some model