DFAO: Stata module to perform Dickey-Fuller unit root test in the presence of additive outliers
dfao is an extension of the dfuller routine in Stata. It performs the D-F unit root test when the data have additive outliers, or temporary one-time shocks. Such outliers give rise to moving average errors with negative coefficients and these in turn result in oversized unit root tests. The method employed here follows Vogelsang (1999). dfao also serves as a replacement for dfuller. Unlike the latter routine, DFAO conducts an automatic sequential t-test to determine the lag length to use in the DF regression (this test can be suppressed). Additionally, dfao calculates response surface critical values using the equations in Cheung and Lai (1995). dfao is for use with version 7.0 of Stata. This is version 1.0.7 of the software.
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