UNIT ROOT TEST IN A THRESHOLD AUTOREGRESSION: ASYMPTOTIC THEORY AND RESIDUAL-BASED BLOCK BOOTSTRAP
This paper develops a test of the unit root null hypothesis against a stationary threshold process. This testing problem is nonstandard and complicated because a parameter is unidentified and the process is nonstationary under the null hypothesis. We derive an asymptotic distribution for the test, which is not pivotal without simplifying assumptions. A residual-based block bootstrap is proposed to calculate the asymptotic <italic>p</italic>-values. The asymptotic validity of the bootstrap is established, and a set of Monte Carlo simulations demonstrates its finite-sample performance. In particular, the test exhibits considerable power gains over the augmented Dickey–Fuller (ADF) test, which neglects threshold effects.
Year of publication: |
2008
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Authors: | Seo, Myung Hwan |
Published in: |
Econometric Theory. - Cambridge University Press. - Vol. 24.2008, 06, p. 1699-1716
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Publisher: |
Cambridge University Press |
Description of contents: | Abstract [journals.cambridge.org] |
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