Unit Root Test In A Threshold Autoregression: Asymptotic Theory And Residual-Based Block Bootstrap
This paper develops a test of the unit root null hypothesis against a stationary threshold process. This testing problem is nonstandard and complicated because a parameter is unidentified and the process is nonstationary under the null hypothesis. We derive an asymptotic distribution for the test, which is not pivotal without simplifying assumptions. A residual-based block bootstrap is proposed to calculate the asymptotic p -values. The asymptotic validity of the bootstrap is established, and a set of Monte Carlo simulations demonstrates its finite-sample performance. In particular, the test exhibits considerable power gains over the augmented Dickey–Fuller (ADF) test, which neglects threshold effects.
Volume (Year): 24 (2008)
Issue (Month): 06 (December)
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