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Local Asymptotic Power of Breitung's Test


  •  The author is thankful to Jörg Breitung, Uwe Hassler and two anonymous referees for helpful comments.


In this article, we derive the local asymptotic power function of the unit root test proposed by Breitung [Journal of Econometrics (2002) Vol. 108, pp. 343–363]. Breitung's test is a non-parametric test and is free of nuisance parameters. We compare the local power curve of the Breitungs’ test with that of the Dickey–Fuller test. This comparison is in fact a quantification of the loss of power that one has to accept when applying a non-parametric test.