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Testing For Nonlinearity In G7 Macroeconomic Time Series

  • Yavuz, Nilgün Çil

    ()

    (Department of Econometrics, Faculty of Economics, Istanbul University,)

  • Yilanci, Veli

    ()

    (Department of Econometrics, Faculty of Economics, Istanbul University,)

In this study, we test the linearity of G7 macroeconomic time series over the period 1959Q1-1999Q4. The stationarity properties of this dataset was before tested by Aksoy and Ledesma (2008) employing unit root tests which are based on linear and nonlinear models. Aksoy and Ledesma (2008) concluded that the variables have uncertain order of integration. Therefore, by employing a recently introduced linearity test of Harvey et al. (2008), which is a powerful test even the order of integration is not certain, we test the linearity of this dataset to determine which kind of unit root test should have been used. We also show that more than half of the series are nonlinear which indicates the importance of testing the nonlinearity of macroeconomic time series.

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Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2012)
Issue (Month): 3 (September)
Pages: 69-79

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Handle: RePEc:rjr:romjef:v::y:2012:i:3:p:69-79
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