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A nonlinear approach to testing the unit root null hypothesis: an application to international health expenditures

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  • Paresh Kumar Narayan
  • Stephan Popp

Abstract

In this article, we examine the unit root null hypothesis for per capita total Health Expenditures (HEs), per capita private HEs and per capita public HEs for 29 Organization for Economic Co-operation and Development (OECD) countries. The novelty of our work is that we use a new nonlinear unit root test that allows for one structural break in the data series. We find that for around 45% of the countries, we are able to reject the unit root hypothesis for each of the three HE series. Moreover, using Monte Carlo simulations, we show that our proposed unit root model has better size and power properties than the widely used Augmented Dickey--Fuller (ADF) and Lagrange Multiplier (LM) type tests.

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  • Paresh Kumar Narayan & Stephan Popp, 2012. "A nonlinear approach to testing the unit root null hypothesis: an application to international health expenditures," Applied Economics, Taylor & Francis Journals, vol. 44(2), pages 163-175, January.
  • Handle: RePEc:taf:applec:44:y:2012:i:2:p:163-175
    DOI: 10.1080/00036846.2010.500276
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    File URL: http://hdl.handle.net/10.1080/00036846.2010.500276
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    1. repec:spr:soinre:v:133:y:2017:i:1:d:10.1007_s11205-016-1357-7 is not listed on IDEAS
    2. Nicholas Apergis & Tsangyao Chang & Christina Christou & Rangan Gupta, 2017. "Convergence of Health Care Expenditures Across the US States: A Reconsideration," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(1), pages 303-316, August.

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