Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 300: A Simple Linear Time Series Model with Misleading Nonlinear Properties

Michael K. Andersson , Bruno Eklund () and Johan Lyhagen ()
Additional contact information
Michael K. Andersson: Dept. of Economic Statistics, Stockholm School of Economics, Postal: P.O. Box 6501, S-113 83 Stockholm, Sweden
Bruno Eklund: Dept. of Economic Statistics, Stockholm School of Economics, Postal: P.O. Box 6501, S-113 83 Stockholm, Sweden
Johan Lyhagen: Dept. of Economic Statistics, Stockholm School of Economics, Postal: P.O. Box 6501, S-113 83 Stockholm, Sweden

Abstract: This paper demonstrates that long memory leads to spurious rejection of the linearity hypothesis, when a STAR specification constitutes the alternative.

Keywords: Fractional integration; Long memory; Smooth transition autoregression

JEL-codes: C12; C22

5 pages, February 9, 1999

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