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Unit root testing against an ST-MTAR alternative: finite-sample properties and an application to the UK housing market

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  • Steven Cook
  • Dimitrios Vougas
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    Abstract

    A class of smooth transition momentum-threshold autoregressive (ST-MTAR) tests is proposed to allow testing of the unit root hypothesis against an alternative of asymmetric adjustment about a smooth nonlinear trend. Monte-Carlo simulation is employed to derive finite-sample critical values for the proposed test and illustrate its attractive power properties against a range of stationary alternatives. The empirical relevance of the ST-MTAR test is highlighted via an application to aggregate house price data for the UK. Interestingly, house prices are found to exhibit structural change characterized a fitted logistic smooth transition process, with the newly proposed ST-MTAR test providing the most significant results of the alternative smooth transition unit root tests available.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840601019331
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    Bibliographic Info

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

    Volume (Year): 41 (2009)
    Issue (Month): 11 ()
    Pages: 1397-1404

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    Handle: RePEc:taf:applec:v:41:y:2009:i:11:p:1397-1404

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    Cited by:
    1. Giorgio Canarella & Stephen M. Miller & Stephen K. Pollard, 2010. "Unit Roots and Structural Change: An Application to US House-Price Indices," Working papers 2010-04, University of Connecticut, Department of Economics, revised Dec 2010.
    2. repec:asi:ajoerj:2013:p:785-807 is not listed on IDEAS
    3. Chen, Shyh-Wei, 2014. "Smooth transition, non-linearity and current account sustainability: Evidence from the European countries," Economic Modelling, Elsevier, vol. 38(C), pages 541-554.
    4. Chen, Shyh-Wei, 2014. "Testing for fiscal sustainability: New evidence from the G-7 and some European countries," Economic Modelling, Elsevier, vol. 37(C), pages 1-15.
    5. Carlos P. Barros & Luis A. Gil-Alana, 2013. "The Housing Markets in Spain and Portugal: Evidence of Persistence," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 19-32, November.
    6. Tsangyao Chang & Tsung-pao Wu & Rangan Gupta, 2013. "Are House Prices in South Africa Really Non-Stationary? Evidence from SPSM-Based Panel KSS Test with a Fourier Function," Working Papers 201324, University of Pretoria, Department of Economics.

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