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Jointly testing linearity and nonstationarity within threshold autoregressions

Pitarakis, Jean-Yves (2012): Jointly testing linearity and nonstationarity within threshold autoregressions.

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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 nite 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.

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