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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

    () (School of Accounting, Economics and Finance, Deakin University)

  • Stephan Popp

    (University of Duisburg-Essen)

Abstract

In this paper, we examine the unit root null hypothesis for per capita total health expenditures, per capital private health expenditures, and per capital public health expenditures for 29 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 per cent of the countries we are able to reject the unit root hypothesis for each of the three health expenditure series. Moreover, using Monte Carlo simulations, we show that our proposed unit root model has better size and power properties than the widely used ADF and LM type tests.

Suggested Citation

  • Paresh Kumar Narayan & Stephan Popp, 2009. "A Nonlinear Approach to Testing the Unit Root Null Hypothesis: An Application to International Health Expenditures," Economics Series 2009_10, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  • Handle: RePEc:dkn:econwp:eco_2009_10
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    File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2009_10.pdf
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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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