Unit Root Testing via the Continuous-path Block Bootstrap By

A new resampling procedure, the continuous-path block bootstrap, is proposed in the context of testing for integrated (unit root) time series. The continuous-path block bootstrap (CBB) is a nonparametric procedure that successfully generates unit root integrated pseudo time series retaining the important characteristics of the data, e.g., the dependence structure of the stationary process driving the randomwalk. As a consequence, the CBB can accurately capture the distribution of many unit root test statistics. Large sample theory for the new bootstrap methodology is developed and the asymptotic validity of CBB{based unit root testing is shown via a bootstrap functional limit theorem. Applications of the new procedure to least squares and Dickey-Fuller type test statistics of the unit root hypothesis are given. Finite-sample simulations con rm a good {level accuracy and an increased power associated with CBB{based unit root testing.