International Journal of Business and Economics Volume 15, No. 2 December, 2016

A Modified ADF Test for Geometric ARMA Processes

Fathali Firoozi

Department of Economics, University of Texas at San Antonio, U.S.A.

Donald Lien

Department of Economics, University of Texas at San Antonio, U.S.A.

Abstract

This study first shows that geometric processes arise naturally and then proposes a modification to the standard augmented Dickey-Fuller (ADF) equation for testing unit root non-stationarity in geometric ARMA processes with . The proposed test equation removes the order truncation bias that is inherent in the standard ADF test equation for such processes.

Keywords：autoregressive moving average processes, order approximation, infinite order.

JEL Classifications：C12, C22.

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