Jointly Testing Linearity and Nonstationarity within Threshold Autoregressions

7 Pages Posted: 26 May 2012

See all articles by Jean-Yves Pitarakis

Jean-Yves Pitarakis

University of Southampton - Division of Economics

Date Written: May 25, 2012

Abstract

We develop a test of the joint null hypothesis of linearity and nonstationarity within a threshold autoregressive process of order one with deterministic components. We derive the limiting distribution of a Wald type test statistic and subsequently investigate its local power and finite sample properties. We view our test as a useful diagnostic tool since a non rejection of our null hypothesis would remove the need to explore nonlinearities any further and support a linear autoregression with a unit root.

Keywords: Threshold Autoregressive Models, Unit Roots, Near Unit Roots, Brownian Bridge, Augmented Dickey Fuller Test

JEL Classification: C2, C5, C12

Suggested Citation

Pitarakis, Jean-Yves, Jointly Testing Linearity and Nonstationarity within Threshold Autoregressions (May 25, 2012). Available at SSRN: https://ssrn.com/abstract=2066462 or http://dx.doi.org/10.2139/ssrn.2066462

Jean-Yves Pitarakis (Contact Author)

University of Southampton - Division of Economics ( email )

Southampton, SO17 1BJ
United Kingdom
+44-23-80592631 (Phone)
+44-23-80593858 (Fax)

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