title: Unit Root Testing and Estimation in Nonlinear ESTAR Models with Normal and Non-Normal Errors.
abstract: Exponential Smooth Transition Autoregressive (ESTAR) models can capture non-linear adjustment of the deviations from equilibrium conditions which may explain the economic behavior of many variables that appear non stationary from a linear viewpoint. Many researchers employ the Kapetanios test which has a unit root as the null and a stationary nonlinear model as the alternative. However this test statistics is based on the assumption of normally distributed errors in the DGP. Cook has analyzed the size of the nonlinear unit root of this test in the presence of heavy-tailed innovation process and obtained the critical values for both finite variance and infinite variance cases. However the test statistics of Cook are oversized. It has been found by researchers that using conventional tests is dangerous though the best performance among these is a HCCME. The over sizing for LM tests can be reduced by employing fixed design wild bootstrap remedies which provide a valuable alternative to the conventional tests. In this paper the size of the Kapetanios test statistic employing hetroscedastic consistent covariance matrices has been derived and the results are reported for various sample sizes in which size distortion is reduced. The properties for estimates of ESTAR models have been investigated when errors are assumed non-normal. We compare the results obtained through the fitting of nonlinear least square with that of the quantile regression fitting in the presence of outliers and the error distribution was considered to be from t-distribution for various sample sizes.
authors.affiliation: Department of Statistics, Abdul wali Khan University Mardan, Mardan, Pakistan.
authors.forename: Umair
authors.identifier: http://orcid.org/0000-0002-0484-5348
authors.initials: U
authors.lastname: Khalil
authors.affiliation: Department of Statistics, University of Peshawar, Peshawar, Pakistan.
authors.lastname: Alamgir
authors.affiliation: Department of Statistics, Islamia College Peshawar, Peshawar, Pakistan.
authors.forename: Amjad
authors.initials: A
authors.lastname: Ali
authors.affiliation: Department of Statistics, Abdul wali Khan University Mardan, Mardan, Pakistan.
authors.forename: Dost Muhammad
authors.initials: DM
authors.lastname: Khan
authors.affiliation: Department of Statistics, Abdul wali Khan University Mardan, Mardan, Pakistan.
authors.forename: Sajjad Ahmad
authors.initials: SA
authors.lastname: Khan
authors.affiliation: Department of Statistics, Abdul wali Khan University Mardan, Mardan, Pakistan.
authors.forename: Zardad
authors.initials: Z
authors.lastname: Khan
mesh_terms: D003625:Data Collection / Q000706:statistics & numerical data*; D006801:Humans; D015233:Models, Statistical; D017711:Nonlinear Dynamics; D016011:Normal Distribution; D012044:Regression Analysis; D018401:Sample Size