A Permutation Test for Unit Root in an Autoregressive Model

Abstract

A permutation test (based on a finite random sample of permutations) for unit root in an autoregressive process is con sidered. The test can easily be carried out in practice and the proposed permutation test is neither limited to large sample sizes nor normal white noises. Simulations show that the power of the permutation test is reasonable when sample sizes are small or when the white noises have a heavy tailed distribution. The test is shown to be consistent.