Linearity tests and stochastic trend under the STAR framework

Lingxiang Zhang ()
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Lingxiang Zhang: Beijing Institute of Technology

Statistical Papers, 2020, vol. 61, issue 6, No 2, 2282 pages

Abstract: Abstract This study investigates the linearity test of smooth transition autoregressive models when the true data generating process is a stochastic trend process. Results show that, under the null hypothesis of linearity, the asymptotic distribution of the W statistic proposed by Teräsvirta (J Am Stat Assoc 89:208–218, 1994) follows the χ2 distribution, whereas the finite sample distribution does not. A maximized Monte Carlo simulation-based test is used to perform the linearity test, and the results show good performance.

Keywords: Linearity; STAR; Stochastic trend; Maximized Monte Carlo simulation-based test (search for similar items in EconPapers)
JEL-codes: C12 C32 C52 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s00362-018-1047-4

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