Munich Personal RePEc Archive

New unit root tests with two smooth breaks and nonlinear adjustment

Hepsag, Aycan (2017): New unit root tests with two smooth breaks and nonlinear adjustment.

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Abstract

This paper proposes new three unit root testing procedures which consider jointly for two structural breaks and nonlinear adjustment. The structural breaks are modelled by means of two logistic smooth transition functions and nonlinear adjustment is modelled by means of ESTAR models. The Monte Carlo experiments display that the empirical sizes of tests are quite close to the nominal ones and in terms of power; the three new unit root tests are superior to the alternative tests. An empirical application involving crude oil underlines the usefulness of the new unit root tests.

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