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Testing for non-linearity in multivariate stochastic processes

  • Marian Vavra

    ()

    (National Bank of Slovakia)

Two well known multivariate non-linearity tests are modified using a principal component analysis. The Monte Carlo results show that the proposed principal component-based tests do provide a remarkable dimensionality reduction without any systematic power loss. It can be concluded that using linear dynamic economic models is in sharp contrast with our empirical findings.

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File URL: http://www.nbs.sk/_img/Documents/PUBLIK/WP_2-2013_Vavra.pdf
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Paper provided by Research Department, National Bank of Slovakia in its series Working and Discussion Papers with number WP 2/2013.

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Length: 37 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:svk:wpaper:1023
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  1. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, vol. 97(3), pages 586-606, June.
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  9. Peres-Neto, Pedro R. & Jackson, Donald A. & Somers, Keith M., 2005. "How many principal components? stopping rules for determining the number of non-trivial axes revisited," Computational Statistics & Data Analysis, Elsevier, vol. 49(4), pages 974-997, June.
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  11. repec:hal:journl:hal-00287137 is not listed on IDEAS
  12. Granger, Clive W. J. & Terasvirta, Timo, 1993. "Modelling Non-Linear Economic Relationships," OUP Catalogue, Oxford University Press, number 9780198773207, March.
  13. Deschamps, P J, 1993. "Joint Tests for Regularity and Autocorrelation in Allocation Systems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(2), pages 195-211, April-Jun.
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  17. Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2008. "Empirical Properties Of Closed- And Open-Economy Dsge Models Of The Euro Area," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S1), pages 2-19, April.
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