The power of modified instrumental variables tests for unit roots

In this paper we investigate the power of Hall's (1989) instrumentalvariables tests for unit roots. A slight modification is madeto Hall's t statistic so that the modified t statistic can beapplied directly without encountering the possible negativestandard error problem of Hall's original t statistic. The majorfinding is that the power curves of the instrumental variablestests are not monotonic functions of the autoregressive coefficientof the unit root models when there is a negative moving averagecomponent.