Combining linear and nonlinear unit root tests with an application to PPP

Jeremy Nguyen and Jen-je Su ()
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Jen-je Su: Griffith University

Economics Bulletin, 2015, vol. 35, issue 4, 2796-2801

Abstract: This paper suggests combining the linear Dickey-Fuller and nonlinear Kapetanios-Snell-Shin unit root tests in ways that explicitly acknowledge the underlying uncertainty regarding linearity versus nonlinearity. Simulation results show the proposed combination tests perform well. An empirical example is provided, where purchasing power parity is tested for 29 real exchange rates.

Keywords: unit root; Dickey-Fuller; Kapetanios-Snell-Shin; union of rejection (search for similar items in EconPapers)
JEL-codes: C2 F3 (search for similar items in EconPapers)
Date: 2015-12-18
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