Testing nonlinearities in economic growth in the OECD countries: an evidence from SETAR and STAR models
Abstract:This study estimates the Self Exciting Threshold Autoregressive (SETAR) and Smooth Transition Autoregressive (STAR) models and examines the nonlinear and regime switching dynamics of economic growth for a set of 10 OECD countries. The null of linearity in SETAR model is tested using the recursive polynomial F test of Tsay and the bootstrap based supremum, average and exponential average Lagrange Multiplier (LM) tests of Hansen. The F test of Tsay rejects the null of linearity for all the countries, except Spain and Switzerland. The SETAR model of Hansen reinforces the evidence and suggests the rejection of linear model. The STAR model rejects the null of linearity against STAR nonlinearity for all the countries, except Denmark and Switzerland. The sequential F tests for the conditional nulls suggest the LSTAR nonlinearity for Australia, Belgium, France, Sweden and UK, and the ESTAR nonlinearity for Canada, Spain and the USA.
Document Type: Research Article
Affiliations: Department of Accounting, Finance and Economics, Griffith Business School,Griffith University, Nathan Campus, 170 Kessels RoadBrisbaneQueensland 4111, Australia
Publication date: 2012-10-01