Look at the Series Is there a Trend?

Yes Estimate No Estimate + t = + yt + y t 0 1 Use

H0 : H1 :

t = +t + yt + y 0 1 1

j t j y

j t j +t y

Use

H 0 : 0 1 , , H1 : 0 1 , ,

to test
v =
0

1
0 0

to test
, , v = 0,0 0, 0

,0,0 , 0, 0

Reject
test =0 using the t-stat. from step 1 using

Accept

Reject

Accept Pure Random Walk

Reject

Accept
Unit Root +Trend

test =0 using the t-stat. from step 1 using

No Unit Root Normal Test procedure to determine the presence of Time trend or Drift

Reject

Accept
Random Walk + Drift
1

Use

To determine if there is a drift as well

Stable Series, use normal test to check the drift