KPSS stationarity test that via residuals augmented with Fourier function

Stationarity tests are of great importance for time series analysis. Because of the fact that analyzes with non-stationary series may be misleading. Formal methods such as unit root tests and informal methods such as time series graph and correlogram analysis are used for stationarity analysis. Although informal methods are important for stationarity analysis, it is difficult to reach a definite conclusion with these methods. Therefore, more formal methods are preferred in the analysis. Since the 1970s, many unit root tests have been developed for stationarity analysis. In this study, a new unit root test is proposed. In this proposed test, Fourier KPSS test developed by Beckers et al. (2006) was adapted residual augmented least squares (RALS) method. Critical values, size and power properties were investigated with Monte Carlo simulations. With proposed RALS Fourier KPSS test, the validity of purchasing power parity theory for E7 countries was examined with quarterly data for the period 1994:Q1-2021:Q2.