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A unit root model for trending time-series energy variables

journal contribution
posted on 01.07.2015, 00:00 authored by Paresh Narayan, Ruipeng LiuRuipeng Liu
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.

History

Journal

Energy economics

Volume

50

Pagination

391 - 402

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

0140-9883

Language

eng

Publication classification

C Journal article; C1 Refereed article in a scholarly journal

Copyright notice

2014, Elsevier