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Bayesian Estimation and Unit Root Test for Logistic Smooth Transition Autoregressive Process

Author

Listed:
  • Anoop Chaturvedi

    (University of Allahabad)

  • Shivam Jaiswal

    (University of Allahabad)

Abstract

The paper considers nonlinear logistic smooth transition autoregressive (LSTAR) process and aims to detect the unit root under the null hypothesis of a random walk process against the alternative of a stationary LSTAR process and to estimate the parameters of the process in Bayesian framework using MCMC. The simulation study is carried out for investigating the performance of the Bayes estimators for parameters and Bayesian unit root test and it has been observed that the estimates of parameters of the LSTAR process are close to the true parameter values. It has been observed that the Bayesian unit root test performs well and the power of the test is high even for the boundary cases having root close to unity, at least when the sample size is large. Since the LSTAR models are widely applied for real exchange rate modeling, the theoretical results are illustrated empirically for the real exchange rates of ten OCED countries.

Suggested Citation

  • Anoop Chaturvedi & Shivam Jaiswal, 2020. "Bayesian Estimation and Unit Root Test for Logistic Smooth Transition Autoregressive Process," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(4), pages 733-745, December.
    • Handle: RePEc:spr:jqecon:v:18:y:2020:i:4:d:10.1007_s40953-019-00193-9
    DOI: 10.1007/s40953-019-00193-9
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    References listed on IDEAS

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    Cited by:

    1. Yanglin Li, 2024. "New Unit Root Tests in the Nonlinear ESTAR Framework: The Movement and Volatility Characteristics of Crude oil and Copper Prices," Computational Economics, Springer;Society for Computational Economics, vol. 63(5), pages 1757-1776, May.

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    More about this item

    Keywords

    LSTAR process; Unit root; Model comparison; Parameter estimation; Bayes factor; MCMC;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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