A New Unit Root Test against Asymmetric ESTAR Nonlinearity with Smooth Breaks

Omid Ranjbar (), Tsangyao Chang, Zahra Mila Elmi () and Chien-Chiang Lee ()
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Zahra Mila Elmi: Faculty of Economics, University of Mazandaran, Babolsar, Iran.

Iranian Economic Review (IER), 2018, vol. 22, issue 1, 51-62

Abstract: This paper proposes a new unit root test against the alternative of symmetric or asymmetric exponential smooth transition autoregressive (AESTAR) nonlinearity that accounts for multiple smooth breaks. We provide small sample properties which indicate the test statistics have good empirical size and power. Also, we compared small sample properties of the test statistics with Christopoulos and Leon-Ledesma (2010) test. The results indicate that our unit root test approach is superior to the test method of Christopoulos and Leon-Ledesma (2010) for both transition parameters (i.e. slow and fast speed), and the test power increases along with the frequency. We apply our test statistics for examining the real interest rate parity hypothesis among OECD countries.

Keywords: Unit Root; Asymmetry; ESTAR; Smooth Breaks; Real Interest Rate Parity. (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eut:journl:v:22:y:2018:i:1:p:51

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