HETEROSKEDASTICITY-ROBUST TESTING FOR A FRACTIONAL UNIT ROOT

This paper shows how fractional unit root tests originally derived under stationarity can be made robust to heteroskedasticity. This is done by using existing tests nested in a regression framework and then implementing these tests using White’s heteroskedasticity consistent standard errors (White, 1980). We show this approach is effective both asymptotically and in finite samples. We also provide some evidence on the asymptotic local power of different implementations of the tests, under both homoskedasticity and heteroskedasticity.