Adaptive Consistent Unit Root Tests Based on Autoregressive Threshold Model

This paper proposes SupWald tests from a threshold autoregressive model computed with an adaptive set of thresholds. Simple examples of adaptive threshold sets are given. A second contribution of the paper is a general asymptotic null limit theory when the threshold variable is a level variable. We obtain a pivotal null limiting distribution under some simple conditions for bounded or asymptotically unbounded thresholds. Our general approach is flexible enough to allow a choice of the auxiliary threshold model or of the threshold set involved in the test specifically designed for nonlinear stationary alternatives relevant for macroeconomic and financial topics involving arbitrage in presence of transaction costs. A Monte-Carlo study and an application to the interest rates spread for French, German, New-Zealander and US post-1980 monthly data illustrate the ability of the adaptive SupWald tests to reject unit-root when the ADF does not