Abstract Unit root testing is the foundation of cointegration model and VEC model. The results of an unit root testing can directly influence on the procession of modeling and the long-run equilibrium relationship and the short error correction mechanism. In fact, unit root testing is sensitive to outliers seriously so as to cause the results of test be erratic. Compared with the other research which are most based on the simulation, this paper gives a firm evidence from the actual example, that is, even a single point can cause the fatal attack to the unit root testing. Meanwhile, we compared the sensitivity among the different methods of unit root testing. Finally, we suggest a pre-test method of detecting the outliers which are influential observation to unit root testing.
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Received: 18 November 2008
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Corresponding Authors:
ZHAO Jin-wen
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