Statistics Project

Stationarity and Unit Root Testing Abstract The purpose of the pouch is to study stationarity and building block root test using truly economic selective information from the Bureau of Statistics Japan and the savings bank of Japan. In the second government agency of the project we depart test for cointegration amongst 2 of the variables in order to exemplify the purpose of stationarity and whole root testing in determining relationships betwixt economic data. Introduction In order to understand why we have to test for stationarity and unit root, we need to remember the canonic concepts. A serial publication is nonmoving if it has a incessant mean, a constant variance and a constant autocovariances for separately lag. Problems arise when using regressions to determine relationships for non-stationary serial publication because non-stationarity impart the influence of past shocks over the variable. Also, non-stationarity can pass weewee spurious reg ressions, meaning regressions between 2 series that ar generated randomly. Normaly, a regression between such 2 series would not be valid. Because of non-stationary series, this regression can seem valid. In investigating stationarity we will use 3 tests, 2 enforce for unit root testing, the Augmented Dickey-Fuller and the Phillip-Peron tests, and a test for stationarity, the KPSS test.

The differences between the 2 types of tests are basically at the form of outline the surmise. While ADF and PP tests have as null theory the fact that the series is non-stationary, the KPSS test is used for a null hypoth esis that says that the series is stationary! . These being said, we will further explain the data used and the results of the tests. Methodology The following historical statistical data are retrieved from the Bureau of Statistics Japan and the Bank of Japan websites: The consumer set index, the real exports and the real imports, given monthly from January 2000 to December 2010. The cost-of-living index is in absolute value, with 2000 and 2005 as basis years, while the authentic Exports and Real...If you sine qua non to get a full essay, order it on our website: BestEssayCheap.com

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