Local power functions of tests for double unit roots

摘要

The purpose of this paper is to characterize three commonly used double unit root tests in terms of their asymptotic local power. To this end we study a class of nearly doubly integrated processes which in the limit will behave as a weighted integral of a double indexed Ornstein-Uhlenbeck process. Based on a numerical examination of the analytical distributions, a comparison of the tests is made via their asymptotic local power functions.