Abstract

Abstract Many types of unit root model are used for modelling macroeconomic time series. Recent interest has centred on nonlinear models that exhibit nonstationary behaviour. Granger and Swanson (1993) introduced the stochastic unit root (STUR) model in which the inclusion of a time-varying coefficient in a first order autoregressive model accommodates stationary or explosive behaviour away from a unit root. The STUR model extends the more usual approach adopted in economics for which first differences of the data are used when a classical test of the null unit root, or difference stationary, model cannot be rejected.

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