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Testing Parameter Constancy in Unit Root Autoregressive Models Against Multiple Continuous Structural Changes

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  • Changli He
  • Rickard Sandberg

Abstract

This article considers tests for logistic smooth transition autoregressive (LSTAR) models accommodating multiple time dependent transitions between regimes when the data generating process is a random walk. The asymptotic null distributions of the tests, in contrast to the standard results in Lin and Teräsvirta (1994), are nonstandard. Monte Carlo experiments reveal that the tests have modest size distortions and satisfactory power against LSTAR models with multiple smooth breaks. The tests are applied to Swedish unemployment rates and the hysteresis hypothesis is over-turned in favour of an LSTAR model with two transitions between extreme regimes.

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  • Changli He & Rickard Sandberg, 2012. "Testing Parameter Constancy in Unit Root Autoregressive Models Against Multiple Continuous Structural Changes," Econometric Reviews, Taylor & Francis Journals, vol. 31(1), pages 34-59.
    • Handle: RePEc:taf:emetrv:v:31:y:2012:i:1:p:34-59
    DOI: 10.1080/07474938.2011.607085
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    Cited by:

    1. Rickard Sandberg, 2016. "Testing for unit roots in nonlinear heterogeneous panels with smoothly changing trends: an application to Scandinavian unemployment rates," Empirical Economics, Springer, vol. 51(3), pages 1053-1083, November.
    2. Zarina Oflaz, 2017. "Structural Break, Nonlinearity and the Hysteresis hypothesis: Evidence from new unit root tests," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 4(2), pages 1-16.
    3. Omay, Tolga & Shahbaz, Muhammad & Stewart, Chris, 2021. "Is There Really Hysteresis in OECD Countries’ Unemployment Rates? New Evidence Using a Fourier Panel Unit Root Test," MPRA Paper 107691, University Library of Munich, Germany, revised 10 May 2021.

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