regressors are highly persistent. The reduced convergence rates may sometimes lead to power losses in finite samples when testing … for no predictability, for instance. The note discusses a simple way of improving the local power of IVX-based tests … the power loss of IVX would have been maximal compared to the infeasible OLS-based test. …

We compare the asymptotic local power of upper-tail unit root tests against an explosive alternative based on ordinary … initialisation, the QD-based tests are near asymptotically efficient and generally offer superior power to OLS-based approaches …; however, the power gains are much more modest than in the lower-tail testing context. We also find that asymptotically non …

they lead to more precise estimation of the persistence parameter and greater power in unit root tests. However, we find … that unit root tests using these recursive procedures tend to lose power significantly when the initial value is very large. …