Unit-Root Tests and Asymmetric Adjustment With an Example Using the Term Structure of Interest Rates |
| |
Authors: | Walter Enders C W J Granger |
| |
Institution: | 1. Department of Economics , Iowa State University , Ames , IA , 50011 E-mail: enders@iastate.edu;2. Department of Economics , University of California at San Diego , La Jolla , CA , 92093 |
| |
Abstract: | This article develops critical values to test the null hypothesis of a unit root against the alternative of stationarity with asymmetric adjustment. Specific attention is paid to threshold and momentum threshold autoregressive processes. The standard Dickey–Fuller tests emerge as a special case. Within a reasonable range of adjustment parameters, the power of the new tests is shown to be greater than that of the corresponding Dickey–Fuller test. The use of the tests is illustrated using the term structure of interest rates. It is shown that the movements toward the long-run equilibrium relationship are best estimated as an asymmetric process. |
| |
Keywords: | Asymmetric time series Threshold adjustment Threshold autoregressive process |
|
|