Asymptotic and bootstrap tests for linearity in a TAR-GARCH(1,1) model with a unit root

Nikolay Gospodinov

Journal of Econometrics, 2008, vol. 146, issue 1, 146-161

Abstract: This paper derives the limiting distribution of the Lagrange Multiplier (LM) test for threshold nonlinearity in a TAR model with GARCH errors when one of the regimes contains a unit root. It is shown that the asymptotic distribution is nonstandard and depends on nuisance parameters that capture the degree of conditional heteroskedasticity and non-Gaussian nature of the process. We propose a bootstrap procedure for approximating the exact finite-sample distribution of the test for linearity and establish its asymptotic validity.

Keywords: Threshold; autoregressive; model; Unit; root; process; GARCH; Two-parameter; Brownian; motion; Bootstrap (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:146:y:2008:i:1:p:146-161

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