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Jeremy Nguyen and Jen-je Su
 
''Combining linear and nonlinear unit root tests with an application to PPP.''
( 2015, Vol. 35 No.4 )
 
 
This paper suggests combining the linear Dickey-Fuller and nonlinear Kapetanios-Snell-Shin unit root tests in ways that explicitly acknowledge the underlying uncertainty regarding linearity versus nonlinearity. Simulation results show the proposed combination tests perform well. An empirical example is provided, where purchasing power parity is tested for 29 real exchange rates.
 
 
Keywords: unit root, Dickey-Fuller, Kapetanios-Snell-Shin, union of rejection
JEL: C2 - Single Equation Models; Single Variables: General
F3 - International Finance: General
 
Manuscript Received : Oct 19 2015 Manuscript Accepted : Dec 18 2015

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