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Bayesian Inference for a Threshold Autoregression with a Unit Root

Listed author(s):
  • Penelope Smith

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Registered author(s):

    A Bayesian approach to distinguishing between nonlinear and unit root behavior offers several practical advantages over equivalent frequentist procedures. Foremost among these advantages is the simplicity of the test. This paper compares the small sample power and size properties of a joint Bayesian test for a unit root and a threshold effect with Caner and Hansen's (2001) frequentist strategy. The results from Monte Carlo experiments indicate that the simpler Bayesian test performs at least as well as Caner and Hansen's procedure.

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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2006n20.pdf
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    Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2006n20.

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    Length: 40 pages
    Date of creation: Oct 2006
    Handle: RePEc:iae:iaewps:wp2006n20
    Contact details of provider: Postal:
    Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia

    Phone: +61 3 8344 2100
    Fax: +61 3 8344 2111
    Web page: http://melbourneinstitute.unimelb.edu.au/
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