Filtering as a Test of Specification

This paper generalizes the first differencing test proposed by C. I. Plosser, G. W. Schwert, and H. White to the case of finite one-sided polynomial filters. The authors demonstrate that the filtering test is asymptotically equivalent to a Hausman-Wu test. This provides a computationally simple way of performing the test and analyzing the test's power. The authors show that the choice of lag weights is nontrivial for filters of order greater than one. By examining the optimal choice of filter, the paper shows under what circumstances filtering tests will be powerful.

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	Cushing, Matthew J Professor of Economics Expertise: Monetary Policy Public Finance Econometrics Economics CBA 352 P.O. Box 880489 University of Nebraska-Lincoln Lincoln, NE 68588-0489, USA Phone: (402) 472-2323 Fax: (402) 472-9700 mcushing1@unl.edu	Cushing, Matthew J	Economics
	McGarvey, Mary G Associate Professor of Economics Expertise: Econometrics Applied Econometrics Public Policy Analysis Economics CBA 351 P.O. Box 880489 University of Nebraska-Lincoln Lincoln, NE 68588-0489, USA Phone: (402) 472-9415 Fax: (402) 472-9700 mmcgarvey1@unl.edu	McGarvey, Mary G	Economics