Test for linearity against STAR models with deterministic trends

Lingxiang Zhang

doi:10.1016/j.econlet.2011.11.018

Test for linearity against STAR models with deterministic trends

Lingxiang Zhang^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

Abstract

This paper studies the linearity test of STAR models with deterministic trends. The results show that when the data generation process includes a deterministic trend, the Wald-type statistic proposed byTeräsvirta (1994) does not follow the standard χ ² distribution, but degenerates at the speed of T. Moreover, when the test for linearity is performed based on the residual of ordinary least squares detrending, the statistical power of the test is very low even when the Wald statistic follows the χ ² distribution.

Original language	English
Pages (from-to)	16-19
Number of pages	4
Journal	Economics Letters
Volume	115
Issue number	1
DOIs	https://doi.org/10.1016/j.econlet.2011.11.018
Publication status	Published - Apr 2012

Keywords

Deterministic trend
Linearity
STAR

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Zhang, L. (2012). Test for linearity against STAR models with deterministic trends. Economics Letters, 115(1), 16-19. https://doi.org/10.1016/j.econlet.2011.11.018

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abstract = "This paper studies the linearity test of STAR models with deterministic trends. The results show that when the data generation process includes a deterministic trend, the Wald-type statistic proposed byTer{\"a}svirta (1994) does not follow the standard χ 2 distribution, but degenerates at the speed of T. Moreover, when the test for linearity is performed based on the residual of ordinary least squares detrending, the statistical power of the test is very low even when the Wald statistic follows the χ 2 distribution.",

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AB - This paper studies the linearity test of STAR models with deterministic trends. The results show that when the data generation process includes a deterministic trend, the Wald-type statistic proposed byTeräsvirta (1994) does not follow the standard χ 2 distribution, but degenerates at the speed of T. Moreover, when the test for linearity is performed based on the residual of ordinary least squares detrending, the statistical power of the test is very low even when the Wald statistic follows the χ 2 distribution.

KW - Deterministic trend

KW - Linearity

KW - STAR

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Test for linearity against STAR models with deterministic trends

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Keywords

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