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A nonlinear approach to testing the unit root null hypothesis: an application to international health expenditures

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  • Paresh Kumar Narayan
  • Stephan Popp

Abstract

In this article, we examine the unit root null hypothesis for per capita total Health Expenditures (HEs), per capita private HEs and per capita public HEs for 29 Organization for Economic Co-operation and Development (OECD) countries. The novelty of our work is that we use a new nonlinear unit root test that allows for one structural break in the data series. We find that for around 45% of the countries, we are able to reject the unit root hypothesis for each of the three HE series. Moreover, using Monte Carlo simulations, we show that our proposed unit root model has better size and power properties than the widely used Augmented Dickey--Fuller (ADF) and Lagrange Multiplier (LM) type tests.

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File URL: http://hdl.handle.net/10.1080/00036846.2010.500276
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 44 (2012)
Issue (Month): 2 (January)
Pages: 163-175

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Handle: RePEc:taf:applec:44:y:2012:i:2:p:163-175

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  1. Lee, Junsoo & Strazicich, Mark C, 2001. " Break Point Estimation and Spurious Rejections with Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-58, December.
  2. Pedro Pita Barros, 1998. "The black box of health care expenditure growth determinants," Health Economics, John Wiley & Sons, Ltd., vol. 7(6), pages 533-544.
  3. Theo Hitiris, 1997. "Health care expenditure and integration in the countries of the European Union," Applied Economics, Taylor & Francis Journals, vol. 29(1), pages 1-6.
  4. Paresh Kumar Narayan & Seema Narayan, 2008. "The role of permanent and transitory shocks in explaining international health expenditures," Health Economics, John Wiley & Sons, Ltd., vol. 17(10), pages 1171-1186.
  5. Narayan, Paresh Kumar, 2006. "Examining structural breaks and growth rates in international health expenditures," Journal of Health Economics, Elsevier, vol. 25(5), pages 877-890, September.
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Cited by:
  1. Shanthini, Rajaratnam, 2007. "Fossil fuel based CO2 emissions, economic growth, and world crude oil price nexus in the United States," MPRA Paper 29574, University Library of Munich, Germany, revised 19 Feb 2011.

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