UNIT ROOT TEST IN A THRESHOLD AUTOREGRESSION: ASYMPTOTIC THEORY AND RESIDUAL-BASED BLOCK BOOTSTRAP

Myung Hwan Seo

Econometric Theory, 2008, vol. 24, issue 6, 1699-1716

Abstract: This paper develops a test of the unit root null hypothesis against a stationary threshold process. This testing problem is nonstandard and complicated because a parameter is unidentified and the process is nonstationary under the null hypothesis. We derive an asymptotic distribution for the test, which is not pivotal without simplifying assumptions. A residual-based block bootstrap is proposed to calculate the asymptotic p-values. The asymptotic validity of the bootstrap is established, and a set of Monte Carlo simulations demonstrates its finite-sample performance. In particular, the test exhibits considerable power gains over the augmented Dickey–Fuller (ADF) test, which neglects threshold effects.

Date: 2008
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Related works:
Working Paper: Unit Root Test in a Threshold Autoregression: Asymptotic Theory and Residual-based Block Bootstrap (2005)
Working Paper: Unit root test in a threshold autoregression: asymptotic theory and residual-based block bootstrap (2005)
Working Paper: Unit Root Test in a Threshold Autoregression: Asymptotic Theory and Residual-based Block Bootstrap (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:etheor:v:24:y:2008:i:06:p:1699-1716_08

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