Response surface models for OLS and GLS detrending-based unit-root tests in nonlinear ESTAR models

Jesus Otero and Jeremy Smith

Stata Journal, 2017, vol. 17, issue 3, 704-722

Abstract: In this article, we calculate response surface models for a large range of quantiles of the Kapetanios, Shin, and Snell (2003, Journal of Econometrics 112: 359–379) and Kapetanios and Shin (2008, Economics Letters 100: 377–380) tests for the null hypothesis of a unit root against the alternative—that the series of interest follows a globally stationary exponential smooth transition autoregressive process. The response surface models allow estimation of finite-sample critical values and approximate p-values for different combinations of the number of ob- servations, T, and the lag order in the test regression, p. The latter can be either specified by the user or optimally selected using a data-dependent procedure. We present the new commands kssur and ksur and illustrate their use with an empirical example.

Keywords: kssur; ksur; unit-root test; nonlinear ESTAR models; Monte Carlo; response surface; critical values; lag length; p-values (search for similar items in EconPapers)
Date: 2017
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