Departmental Bulletin Paper TESTING FOR LINEARITY IN REGRESSIONS WITH I(1) PROCESSES

ARAI, YOICHI

57 ( 1 )  , pp.111 - 138 , 2016-06 , Hitotsubashi University
ISSN:0018-280x
NCID:AA00207547
Description
We propose a generalized version of the RESET test for linearity in regressions with I(1) processes against various nonlinear alternatives and no cointegration. The proposed test statistic for linearity is given by the Wald statistic and its limiting distribution under the null hypothesis is shown to be a χ2 distribution with a "leads and lags" estimation technique. We show that the test is consistent against a class of nonlinear alternatives and no cointegration. Finite-sample simulations show that the empirical size is close to the nominal one and the test succeeds in detecting both nonlinearity and no cointegration.
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http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/27943/1/HJeco0570101110.pdf

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