Testing for a Unit Root against Nonlinear STAR Models

George Kapetanios
Authors registered in the RePEc Author Service: Dirk Willem te Velde and Andy Snell

No 164, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: In this paper we propose a simple testing procedure to detect the presence of nonstationarity against nonlinear stationarity based on the Smooth Transition Autoregressive modelling approach. We provide an advance over the existing literature in three senses: first, we derive the limiting nonstandard distribution of the proposed NLADF tests; second, we establish the superior power performance of the NLADF test over the standard linear ADF test under the alternative of nonlinear stationarity via Monte Carlo simulation exercises; third we provide an application to ex post real interest rates from six major OECD countries, and find the NLADF test is able to reject a unit root in cases, whereas the linear ADF tests fail.

Date: 2000-03
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Citations: View citations in EconPapers (113)

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Working Paper: Testing for a Unit Root against Nonlinear STAR Models (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:164

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