Testing Fractional Unit Roots with Non-linear Smooth Break Approximations using Fourier functions

Luis Gil-Alana and Olaoluwa Yaya

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we present a testing procedure for fractional orders of integration in the context of non-linear terms approximated by Fourier functions. The procedure is a natural extension of the linear method proposed in Robinson (1994) and similar to the one proposed in Cuestas and Gil-Alana (2016) based on Chebyshev polynomials in time. The test statistic has an asymptotic standard normal distribution and several Monte Carlo experiments conducted in the paper show that it performs well in finite samples. Various applications using real life time series, such as US unemployment rates, US GNP and Purchasing Power Parity (PPP) of G7 countries are presented at the end of the paper.

Keywords: Fractional unit root; Chebyshev polynomial; Monte Carlo simulation; Nonlinearity; Smooth break; Fourier transform (search for similar items in EconPapers)
JEL-codes: C12 C15 C22 (search for similar items in EconPapers)
Date: 2018-11-16
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Testing fractional unit roots with non-linear smooth break approximations using Fourier functions (2021)
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