Unit Roots and Smooth Transitions: A Replication

Kulaksizoglu, Tamer (2015): Unit Roots and Smooth Transitions: A Replication.

Abstract

This paper replicates Leybourne et al. (1998), who propose a Dickey-Fuller type test for unit root that is most appropriate when there is reason to suspect the possibility of deterministic structural change in the series. We find that our replicated results are quite similar to the authors' results. We also make the Ox source code available.

• Item Type: MPRA Paper
• Language: English
• Keywords: Dickey-Fuller test, Integrated process, Nonlinear trend, Structural change
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General

References

Granger, C. W. J. and Teräsvirta, T. (1993). Modelling Nonlinear Economic Relationships. Oxford University Press.

Leybourne, S., Newbold, P., and Vougas, D. (1998). Unit roots and smooth transitions. Journal of Time Series Analysis, 19(1):83-97.

Maugeri, N. (2014). Some pitfalls in smooth transition models estimation: A Monte Carlo study. Computational Economics, 44(3):339-378.

Nelson, C. R. and Plosser, C. I. (1982). Trends and random walks in macroeconomic time series: Some evidence and implications. Journal of Monetary Economics, 10:139-162.

Perron, P. (1989). The Great Crash, the oil price shock and the unit root hypothesis. Econometrica, 57:1361-1401.

Perron, P. (1990). Testing for a unit root in a time series with a changing mean. Journal of Business and Economic Statistics, 8:153-162.

Teräsvirta, T. (1998). Handbook of Applied Economic Statistics, chapter Modelling Economic Relationships with Smooth Transition Regressions, pages 229-246. Dekker, New York.

Teräsvirta, T. (2004). Applied Time Series Econometrics, chapter Smooth Transition Regression Modelling, pages 222-242. Cambridge University Press, Cambridge.

Zivot, E. and Andrews, D. W. K. (1992). Further evidence on the Great Crash, the oil price shock and the unit root hypothesis. Journal of Business and Economic Statistics, 10:251-270.