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A New Test of Asymmetric Stationarity in the Presence of Deterministic Trends: Simulation and Empirical Evidence

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  • Steven Cook

    (University of Wales Swansea, United Kingdom)

Abstract

Using local-to-unity detrending, a modified momentum-threshold autoregressive test is derived to allow the unit root hypothesis to be tested against an alternative of asymmetric stationarity about a deterministic trend. Monte Carlo evidence is presented to show the increased power of the proposed test in the presence of asymmetric adjustment relative to the familiar Dickey-Fuller (1979) test and the momentum-threshold autoregressive test of Enders and Granger (1998). The empirical relevance of the test is illustrated via an application to New Zealand national output over the period 1870-2001, where in contrast to findings obtained using alternative unit root tests, the unit root hypothesis is conclusively rejected.

Suggested Citation

  • Steven Cook, 2004. "A New Test of Asymmetric Stationarity in the Presence of Deterministic Trends: Simulation and Empirical Evidence," The International Journal of Applied Economics, Department of General Business, Southeastern Louisiana University, vol. 1(1), pages 46-54, September.
    • Handle: RePEc:ija:ancoec:v:1:y:2004:i:1:p:46-54
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    More about this item

    Keywords

    Unit root tests; local-to-unity detrending; momentum-threshold autoregression;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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