ESTAR model with multiple fixed points. Testing and Estimation

David A. Peel, Ivan Paya () and Ioannis A. Venetis ()

No 5916, Working Papers from Lancaster University Management School, Economics Department

Abstract: In this paper we propose a globally stationary augmentation of the Exponential Smooth Transition Autoregressive (ESTAR) model that allows for multiple fixed points in the transition function. An F-type test statistic for the null of nonstationarity against such globally stationary nonlinear alternative is developed. The test statistic is based on the standard approximation of the nonlinear function under the null hypothesis by a Taylor series expansion. The model is applied to the U.S real interest rate data for which we find evidence of the new ESTAR process.

Keywords: ESTAR; unit toot; real interest rates (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2009
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