Non-linearity in Testing for Fiscal Sustainability

Testing for Stochastic Non- Linearity in the Rational Expectations Permanent Income Hypothesis

The Rational Expectations Permanent Income Hypothesis implies that consumption follows a martingale. However, most empirical tests have rejected the hypothesis. Those empirical tests are based on linear models. If the data generating process is non-linear, conventional tests may not assess some of the randomness properly. As a result, inference based on conventional tests of linear models can b...

Testing Fiscal Sustainability in Poland: A Bayesian Analysis of Cointegration

testing for stochastic non- linearity in the rational expectations permanent income hypothesis

the rational expectations permanent income hypothesis implies that consumption follows a martingale. however, most empirical tests have rejected the hypothesis. those empirical tests are based on linear models. if the data generating process is non-linear, conventional tests may not assess some of the randomness properly. as a result, inference based on conventional tests of linear models can b...

Testing for non-linearity in daily sterling exchange rates

A number of tests for non-linear dependence in time series are presented and implemented on a set of 10 daily sterling exchange rates covering the entire postBretton Ð Woods era until the present day. Irrefutable evidence of non-linearity is shown in many of the series, but most of this dependence can apparently be explained by reference to the GARCH family of models. It is suggested that the l...

Testing for non-linearity in EEG signal of healthy subjects.

Spontaneous EEG of 21 healthy human subjects obtained by standard procedure of recording is analysed using non-linear prediction methods to check whether the signals were generated by a non-linear dynamics process or by a linear stochastic process. The test for non-linearity is performed by surrogate data method with non-linear prediction error as the test statistic. The null hypothesis that EE...