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ABSTRACT This article investigates the effects of time-varying variance on the asymmetric exponential smooth transition autoregressive (AESTAR) unit root test. We propose a wild bootstrap-based implementation of the test, which… Click to show full abstract
ABSTRACT This article investigates the effects of time-varying variance on the asymmetric exponential smooth transition autoregressive (AESTAR) unit root test. We propose a wild bootstrap-based implementation of the test, which is asymptotically valid under time-varying variance. We apply our proposed method to test the Purchasing Power Parity (PPP) hypothesis for Asian countries and regions, and find that our proposed test provides stronger evidence against the PPP hypothesis than the conventional AESTAR test.
Journal Title: Applied Economics Letters
Year Published: 2017
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