Linearity tests and stationarity
This paper shows that the asymptotic distributions of LM -type linearity tests against Smooth Transition Autoregressive (STAR) models, in the presence of a unit root, are non-standard and using standard χ 2 critical values may lead to incorrect inference as the tails of the distribution of tests will be thicker than the χ 2 . This finding also indicates that one needs to test for stationarity prior to applying linearity tests. Copyright Royal Economic Socciety 2004
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Volume (Year): 7 (2004)
Issue (Month): 1 (June)
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