Testing I(1) against I(d) alternatives in the presence of deteministic components

Abstract

This paper discusses the role of deterministic components in the DGP and in the auxiliary regression model which underlies the implementation of the Fractional Dickey-Fuller (FDF) test for I(1) against I(d) processes with d € [0, 1). This is an important test in many economic applications because I(d) processess with dDeterministic components, Dickey-Fuller test, fractionally Dickey-Fuller test, fractional processes, long memory, trends, unit roots