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Robust and Powerful Tests for Nonlinear Deterministic Components

Sam Astill, David Harvey, Stephen Leybourne () and Robert Taylor

Oxford Bulletin of Economics and Statistics, 2015, vol. 77, issue 6, 780-799

Abstract: type="main" xml:id="obes12079-abs-0001">

We develop a test for the presence of nonlinear deterministic components in a univariate time series, approximated using a Fourier series expansion, designed to be asymptotically robust to the order of integration of the process and to any weak dependence present. We show that our proposed test has uniformly greater local asymptotic power than the existing tests of Harvey, Leybourne and Xiao (2010) when the shocks are I(1), identical local asymptotic power when the shocks are I(0), and also improved finite sample properties. We also consider the issue of determining the number of Fourier frequencies used to specify any nonlinear deterministic components.

Date: 2015
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