Partial unit root and linear spurious regression: A Monte Carlo simulation study
Economics Letters, 2013, vol. 118, issue 1, 189-191
In this paper, we consider both the partial unit root and the near partial unit root processes in nonlinear transition autoregression models. Our simulations show that when these time series data are used in ordinary least squares regression, spurious regression occurs. However, if we re-estimate the regression by adding an AR(1) term, spurious regression can almost be eliminated.
Keywords: Partial unit root; Spurious regression; Monte Carlo simulation (search for similar items in EconPapers)
JEL-codes: C12 C32 C52 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:118:y:2013:i:1:p:189-191
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