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Test for linearity against STAR models with deterministic trends

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  • Zhang, Lingxiang
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    Abstract

    This paper studies the linearity test of STAR models with deterministic trends. The results show that when the data generation process includes a deterministic trend, the Wald-type statistic proposed by Teräsvirta (1994) does not follow the standard χ2 distribution, but degenerates at the speed of T. Moreover, when the test for linearity is performed based on the residual of ordinary least squares detrending, the statistical power of the test is very low even when the Wald statistic follows the χ2 distribution.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165176511004691
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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 115 (2012)
    Issue (Month): 1 ()
    Pages: 16-19

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    Handle: RePEc:eee:ecolet:v:115:y:2012:i:1:p:16-19

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Linearity; STAR; Deterministic trend;

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    1. van Dijk, Dick & Teräsvirta, Timo & Franses, Philip Hans, 2000. "Smooth Transition Autoregressive Models - A Survey of Recent Developments," Working Paper Series in Economics and Finance 380, Stockholm School of Economics, revised 17 Jan 2001.
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    Cited by:
    1. Kaufmann, Hendrik & Kruse, Robinson & Sibbertsen, Philipp, 2012. "On tests for linearity against STAR models with deterministic trends," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-492, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.

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