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Nonlinearities and the order of integration of oil prices

Author

Listed:
  • Juan Carlos Cuestas
  • Paulo Jose Regis
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.

Suggested Citation

  • Juan Carlos Cuestas & Paulo Jose Regis, 2008. "Nonlinearities and the order of integration of oil prices," NBS Discussion Papers in Economics 2008/15, Economics, Nottingham Business School, Nottingham Trent University.
    • Handle: RePEc:nbs:wpaper:2008/15
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    References listed on IDEAS

    as
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    Cited by:

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    2. Kisswani, Khalid M. & Nusair, Salah A., 2013. "Non-linearities in the dynamics of oil prices," Energy Economics, Elsevier, vol. 36(C), pages 341-353.
    3. Yaya, OlaOluwa Simon & Gil-Alana, Luis Alberiko & Carcel, Hector, 2015. "Testing fractional persistence and non-linearities in the natural gas market: An application of non-linear deterministic terms based on Chebyshev polynomials in time," Energy Economics, Elsevier, vol. 52(PA), pages 240-245.

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    More about this item

    Keywords

    Unit roots; Nonlinearities; Oil price;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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