Stochastic unit-root processes

Abstract

In practice there are many types of processes that have near unit roots and are very difficult to distinguish from standard unit-root processes, given a finite sample. In our thesis we study a particular class of such processes, also called STUR processes. They have a root that is stochastic and varying around unity. We also study standard unit-root processes and cointegration. In cointegration analysis, the first step is to test whether the variables of interest have a unit root, and thus, unit root tests are used in application of cointegration.