A new nonlinear unit root test with Fourier function

Abstract

Traditional unit root tests display a tendency to be nonstationary in the case of structural breaks and nonlinearity. To eliminate this problem this paper proposes a new flexible Fourier form nonlinear unit root test. This test eliminates this problem to add structural breaks and nonlinearity together to the test procedure. In this test procedure, structural breaks are modeled by means of a Fourier function and nonlinear adjustment is modeled by means of an Exponential Smooth Threshold Autoregressive (ESTAR) model. The simulation results indicate that the proposed unit root test is more powerful than the Kruse (2011) and KSS(2003) tests.

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“…In other words, in the traditional unit root tests, the real problem occurs when we try to identify the time, number and form of the break since in reality, it is not possible to identify them. For this reason, we employed two different nonlinear unit root tests with Fourier approach, Christopoulos and Leon-Ledesma [2010] and Güriş [2018], in order to improve the reliability of the results.…”

“…In Table 7, Güriş [2018] test results indicate that the null hypothesis of unit root is rejected at the 5% level of significance for both female and male graduates. Hysteresis hypothesis is not valid considering the test results given in Table 7.…”

“…Hysteresis hypothesis is not valid considering the test results given in Table 7. KSS [2003], Kruse [2011], Christopoulos and Leon-Ledesma [2010] and Güriş [2018] test results report that the unit root hypothesis is not valid for female graduates for the period of 1988-2013. In addition, the null hypothesis is rejected for male graduates as a result of the KSS [2003], Sollis [2009], Kruse [2011] and Güriş [2018] tests.…”

The Asymmetric Impact of Trade Openness on Inflation in Sudan

“…Table 2 shows that all variables were stationary at the first difference. (Güriş, 2017). Table 5 shows that the test stat (Güriş, 2017) is greater than the critical values at the 10% and 5% levels.…”

The Middle Income Trap: Theory and Empirical Evidence

“…If the series are non-linear, FKSS unit root test proposed by Christopoulos and Leon-Ledesma (2010) should be applied. FKSS is a 3-stage test procedure (Güriş, 2018;Yılancı & Eris, 2013). In the first stage, components are defined as shown in the following equations and the residuals are generated with the ordinary least square (OLS) estimation of the equation using the optimal frequency (k) value: THE MIDDLE INCOME TRAP: THEORY AND EMPIRICAL EVIDENCE…”