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Nonlinearities and the order of integration of oil prices

Juan Cuestas and Paulo Regis

NBS Discussion Papers in Economics from Economics, Nottingham Business School, Nottingham Trent University

Abstract: Unit root tests are the starting point of most empirical time series research. This paper analyses the order of integration of oil prices taking into account the possibilities of nonlinearities in the deterministic components. Using an aggregate index for the price of oil, and applying Bierens (1997) unit root tests, we find that the hypothesis of a unit root process is rejected in favour of nonlinear trend stationarity of the price of crude oil. On the contrary, preliminary analysis using Ng and Perron (2001) and Kapetanios, Shin and Snell's (2003) tests, fail to reject the hypothesis of a unit root.

Keywords: Unit roots; Nonlinearities; Oil price (search for similar items in EconPapers)
JEL-codes: C22 E39 Q43 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://www.ntu.ac.uk/__data/assets/pdf_file/0020/3 ... ation-oil-prices.pdf First version, 2008 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:nbs:wpaper:2008/15

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