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A unit root test based on smooth transitions and nonlinear adjustment

Hepsag, Aycan (2017): A unit root test based on smooth transitions and nonlinear adjustment.

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Abstract

In this paper, we develop a new unit root testing procedure which considers jointly for structural breaks and nonlinear adjustment. The structural breaks are modeled by means of a logistic smooth transition function and nonlinear adjustment is modeled by means of an ESTAR model. The empirical size of test is quite close to the nominal one and in terms of power, the new unit root test is generally superior to the alternative test.

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