10th International Days of Statistics and Economics, Prague, Czech Republic, 8 - 10 September 2016, pp.523-532
Economic series may have unit roots. There are different methods to test unit roots in the literature. Recent studies show the advantages of using Bridge estimator for choosing the lag length of unit root tests and computing test statistics. This method penalizes the parameters of the model with a positive shrinkage parameter. For a suitable choice of the shrinkage parameter, the limiting distributions of the Bridge estimator can have positive probability mass at 0 when the true value of the parameter is zero for stationary series. Therefore, the Bridge estimator provides a method that can be used for the model selection and estimation simultaneously. It is known in the literature that Bridge estimator does the model selection while simultaneously distinguishing between stationary and unit root models for series with a unit root as well. In this study, we propose Bridge estimator to determine the integration order of series with more than one unit root. In order to do this, we apply the Bridge estimator to Dickey-Pantula model. We evaluate the size and power of the Bridge estimator with a simulation study and compare our proposed estimator with the existent Dickey-Pantula test.