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A New Test of Asymmetric Stationarity in the Presence of Deterministic Trends: Simulation and Empirical Evidence

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  • Steven Cook

    (University of Wales Swansea, United Kingdom)

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    Abstract

    Using local-to-unity detrending, a modified momentum-threshold autoregressive test is derived to allow the unit root hypothesis to be tested against an alternative of asymmetric stationarity about a deterministic trend. Monte Carlo evidence is presented to show the increased power of the proposed test in the presence of asymmetric adjustment relative to the familiar Dickey-Fuller (1979) test and the momentum-threshold autoregressive test of Enders and Granger (1998). The empirical relevance of the test is illustrated via an application to New Zealand national output over the period 1870-2001, where in contrast to findings obtained using alternative unit root tests, the unit root hypothesis is conclusively rejected.

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    Bibliographic Info

    Article provided by Department of General Business, Southeastern Louisiana University in its journal The International Journal of Applied Economics.

    Volume (Year): 1 (2004)
    Issue (Month): 1 (September)
    Pages: 46-54

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    Handle: RePEc:ija:ancoec:v:1:y:2004:i:1:p:46-54

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    Related research

    Keywords: Unit root tests; local-to-unity detrending; momentum-threshold autoregression;

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