In this paper we develop a simple test procedure for a linear trend which does not require knowledge of the form of serial correlation in the data, is robust to strong serial correlation, and has a standard normal limiting null distribution under either I(0) or I(1) shocks. In contrast to other available robust linear trend tests, our proposed test achieves the Gaussian asymptotic local power envelope in both the I(0) and I(1) cases. For near-I(1) errors our proposed procedure is conservative and a modification for this situation is suggested. An estimator of the trend parameter, together with an associated confidence interval, which is asymptotically efficient, again regardless of whether the shocks are I(0) or I(1), is also provided.
Download the paper in PDF format
David I. Harvey, Stephen J. Leybourne and A. M. Robert Taylor
View all Granger Centre discussion papers | View all School of Economics featured discussion papers
School of EconomicsUniversity of Nottingham
Nottingham, NG7 2RD
Connect with the University of Nottingham through social media and our blogs.
Campus maps | More contact information | Jobs