Performance of unit-root tests for non linear unit-root and partial unit-root processes

ABSTRACT: This paper investigates the finite-sample performance of the augmented Dickey–Fuller (ADF), Phillips–Perron (PP), momentum threshold autoregressive (M-TAR), Kapetanios–Shin–Snell (KSS), and the inf-t unit-root tests. Simulation results show that the ADF and KSS tests have better size, whereas other tests generate severe size distortions when the date-generating processes are non linear unit-root processes. In general, with regard to the combination of test powers with test sizes, the ADF and KSS tests are comparatively better than the PP, M-TAR, and inf-t tests; moreover, the inf-t test exhibits the poorest performance even for larger sample sizes.