A note on testing for purchasing power parity

We examine the asymptotic behavior of unit root tests against nonlinear alternatives of the exponential smooth transition type if the data is erroneously nonlinearly transformed. We show analytically and by a Monte Carlo study that the probability of rejecting the correct null of a random walk depends heavily on the type of data transformation.

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Year of publication:	2011
Authors:	Heinen, Florian
Publisher:	Hannover : Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät
Subject:	Kaufkraftparität \| Kointegration \| Modellierung \| Theorie \| Unit roots \| Misspecification \| Nonlinear data transformation \| Purchasing Power Parity

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Series:	Diskussionsbeitrag ; 471
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	660708973 [GVK] hdl:10419/66029 [Handle] RePEc:han:dpaper:dp-471 [RePEc]
Classification:	C12 - Hypothesis Testing ; C22 - Time-Series Models ; F31 - Foreign Exchange
Source:	EconStor

Persistent link: https://www.econbiz.de/10010289013