A new nonlinear unit root test with Fourier function

Güriş B.

COMMUNICATIONS IN STATISTICS-SIMULATION AND COMPUTATION, vol.48, pp.3056-3062, 2019 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Volume: 48
  • Publication Date: 2019
  • Doi Number: 10.1080/03610918.2018.1473591
  • Journal Name: COMMUNICATIONS IN STATISTICS-SIMULATION AND COMPUTATION
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus
  • Page Numbers: pp.3056-3062
  • Keywords: Flexible Fourier form, nonlinearity, unit root test, REAL EXCHANGE-RATES, OIL-PRICE SHOCK, ASYMMETRIC ADJUSTMENT, GREAT CRASH
  • Istanbul University Affiliated: Yes

Abstract

Traditional unit root tests display a tendency to be nonstationary in the case of structural breaks and nonlinearity. To eliminate this problem this paper proposes a new flexible Fourier form nonlinear unit root test. This test eliminates this problem to add structural breaks and nonlinearity together to the test procedure. In this test procedure, structural breaks are modeled by means of a Fourier function and nonlinear adjustment is modeled by means of an exponential smooth threshold autoregressive (ESTAR) model. The simulation results indicate that the proposed unit root test is more powerful than the Kruse and KSS tests.