Smooth Transitions, Asymmetric Adjustment and Unit Roots
AbstractThe aim of this paper is to develop a unit root test that takes into account two sources of nonlinearites in data, i.e. asymmetric speed of mean reversion and structural changes. The asymmetric speed of mean reversion is modeled by means of a exponential smooth transition autoregression (ESTAR) function for the autoregressive parameter, whereas structural changes are approximated by a smooth transition in the deterministic components. We find that the proposed test performs well in terms of size and power, in particular when the autoregressive parameter is close to one.
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Bibliographic InfoPaper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2012012.
Length: 12 pages
Date of creation: 2012
Date of revision:
unit roots; nonlinear trends; exponential smooth transition; autoregressive model; structural change;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-08 (All new papers)
- NEP-ECM-2012-05-08 (Econometrics)
- NEP-ETS-2012-05-08 (Econometric Time Series)
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