A powerful test for linearity when the order of integration is unknown

David Harvey, Stephen Leybourne () and Bin Xiao

Discussion Papers from University of Nottingham, Granger Centre for Time Series Econometrics

Abstract: In this paper we propose a test of the null hypothesis of time series linearity against a nonlinear alternative, when uncertainty exists as to whether or not the series contains a unit root. We provide a test statistic that has the same limiting null critical values regardless of whether the series under consideration is generated from a linear I(0) or linear I(1) process, and is consistent against nonlinearity of either form, being asymptotically equivalent to the efficient test in each case. Finite sample simulations show that the new procedure has better size control and offers substantial power gains over the recently proposed robust linearity test of Harvey and Leybourne (2007).

Keywords: Nonlinearity testing; Wald tests; unit root tests; stationarity tests (search for similar items in EconPapers)
Date: 2007-10
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https://www.nottingham.ac.uk/research/groups/grangercentre/documents/07-06.pdf (application/pdf)

Related works:
Journal Article: A Powerful Test for Linearity When the Order of Integration is Unknown (2008)
Working Paper: A powerful test for linearity when the order of integration is unknown (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notgts:07/06

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