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Testing for non-linearity in multivariate stochastic processes

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  • Marian Vavra

    ()
    (National Bank of Slovakia)

Abstract

Two well known multivariate non-linearity tests are modified using a principal component analysis. The Monte Carlo results show that the proposed principal component-based tests do provide a remarkable dimensionality reduction without any systematic power loss. It can be concluded that using linear dynamic economic models is in sharp contrast with our empirical findings.

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Bibliographic Info

Paper provided by Research Department, National Bank of Slovakia in its series Working and Discussion Papers with number WP 2/2013.

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Length: 37 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:svk:wpaper:1023

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Keywords: non-linearity testing; principal component analysis; Monte Carlo method;

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References

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Cited by:
  1. Marian Vavra, 2013. "Testing for linear and Markov switching DSGE models," Working and Discussion Papers WP 3/2013, Research Department, National Bank of Slovakia.

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