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No. 472: GLS Detrending for Nonlinear Unit Root Tests

George Kapetanios , Queen Mary, University of London
Yongcheol Shin , University of Edinburgh

November 1, 2002

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Abstract

This paper investigates GLS detrending procedures for unit root tests against nonlinear stationary alternative hypotheses where deterministic components are assumed present in the series under investigation. It is found that the proposed procedures have considerable power gains in a majority of cases against both existing nonlinear unit root tests and standard unit root tests.

J.E.L classification codes: C12, C22, F31

Keywords:Detrending, Nonlinear unit root tests, Nonlinearity, STAR models, SETAR models

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