The Granger Centre for Time Series Econometrics

GC 07/01: A powerful test for linearity when the order of integration is unknown [Revised to become No. 07/06]



In this paper we propose a test of the null hypothesis of time series linearity against a nonlinear alternative, when uncertainty exists as to whether or not the series contains a unit root. We provide a test statistic that has the same limiting null critical values regardless of whether the series under consideration is generated from a linear I(0) or linear I(1) process, and is consistent against nonlinearity of either form, being asymptotically equivalent to the efficient test in each case. Finite sample simulations show that the new procedure has good size control and offers substantial power gains over the recently proposed robust linearity test of Harvey and Leybourne (2007).

Download the paper in PDF format


David I. Harvey, Stephen J. Leybourne and Bin Xiao


View all Granger Centre discussion papers | View all School of Economics featured discussion papers


Posted on Monday 1st January 2007

The Granger Centre for Time Series Econometrics

School of Economics
University of Nottingham
University Park
Nottingham, NG7 2RD