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Nonlinearity and Smooth Breaks in Unit Root Testing

Author

Listed:
  • Tolga Omay

    (Cankaya University, Department of Banking and Finance)

  • Dilem Yildirim

    (METU University, Department of Economics)

Abstract

We develop unit root tests that allow under the alternative hypothesis for a smooth transition between deterministic linear trends, around which stationary asymmetric adjustment may occur by employing exponential smooth transition auto-regressive (ESTAR) models The small sample properties of the newly developed test are briefly investigated and an application for investigating the PPP hypothesis for Argentina is provided.

Suggested Citation

  • Tolga Omay & Dilem Yildirim, 2014. "Nonlinearity and Smooth Breaks in Unit Root Testing," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 1(1), pages 1-9.
  • Handle: RePEc:bmo:bmoart:v:1:y:2014:i:1:p:1-9
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    References listed on IDEAS

    as
    1. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-311, July.
    2. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February.
    3. Omay, Tolga, 2012. "The comparison of optimization algorithms on unit root testing with smooth transition," MPRA Paper 42129, University Library of Munich, Germany.
    4. Robert Sollis, 2004. "Asymmetric adjustment and smooth transitions: a combination of some unit root tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 25(3), pages 409-417, May.
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    Citations

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    Cited by:

    1. Banu Kurtaran, 2015. "Re-examining the PPP Hypothesis via Nonlinearity and Smooth Breaks," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 2(1), pages 1-21.
    2. repec:taf:applec:v:50:y:2018:i:12:p:1289-1308 is not listed on IDEAS
    3. repec:bmo:bmoart:v:4:y:2017:i:1:p:17-32 is not listed on IDEAS
    4. Melis Tartici, 2015. "A Reinvestigation of the Hysteresis Hypothesis in the OECD Countries," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 2(1), pages 22-40.
    5. Tolga Omay & Furkan Emirmahmutoglu & Mubariz Hasanov, 2018. "Structural break, nonlinearity and asymmetry: a re-examination of PPP proposition," Applied Economics, Taylor & Francis Journals, vol. 50(12), pages 1289-1308, March.

    More about this item

    Keywords

    Smooth Break; Nonlinear Unit Root Test; PPP.;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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