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Abstract
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This paper investigates the new prior distribution on the Unobserved-ARCH unit
root test. Monte Carlo simulations show that the sample size is seriously e ective in
eciency of Bayesian test. To improve the performance of Bayesian test for unit root
we propose a new Bayesian test that is robust in the presence of stationary and nonstationary
Unobserved-ARCH. The nite sample property of the proposed test statistic
is evaluated using Monte Carlo studies. Applying the developed method, we test the
policy of daily exchange rate of the German Marc with respect to the Greek Drachma.
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