The Univariate MT-STAR Model and a new linearity and unit root test procedure | Dr. Peter Martey Addo

The Univariate MT-STAR Model and a new linearity and unit root test procedure

Abstract

A novel procedure to test for linearity and unit root in a nonlinear framework is proposed by introducing a new model–the MT-STAR model–which has similar properties of the ESTAR model but reduces the effects of the identification problem and can also account for asymmetry in the adjustment mechanism towards equilibrium. The asymptotic distribution of the proposed unit root test is non standard and is derived. The power of the test is evaluated through a simulation study and some empirical illustrations on real exchange rates show its accuracy.

Publication
Computational Statistics & Data Analysis(CSDA) 76(4–19)
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Peter Martey Addo
Senior Data Scientist

I am keen on ways we can leverage data and emerging technologies to improve people’s lives.