Jointly Testing Linearity and nonstationarity within threshold Autoregressions.
Author: Jean-Yves Pitarakis (University of Southampton)
Paper number: 1206
Abstract
We develop a test of the joint null hypothesis of linearity and nonstationarity within a threshold autoregressive process of order one with deterministic components. We derive the limiting distribution of a Wald type test statistic and subsequently investigate its local power and finite sample properties. We view our test as a useful diagnostic tool since a non rejection of our null hypothesis would remove the need to explore nonlinearities any further and support a linear autoregression with a unit root.