A Unied Theoretical Framework when Testing the Unit Root Hypothesis in Multiple-Regime STAR Type of Models

Several tests of a unit root in Multiple Regime STAR models and in the Time-Varying STAR model are presented. The number of regimes may be set arbitrarily and the transition variable may be endogenously or exogenously determined. The tests are easy to apply and are conducted by OLS under the assumption of weakly dependent heterogeneously distributed errors. Key words: Unit roots, Multiple Regimes, STAR models, Nonlinear trends, Nonlinear mean-reversion, Strong mixing. e-mail:[email protected] Acknowledgements: This research has been supported by the Jan Wallander’s and Tom Hedelius’Foundation, Grant No. J02-35. A …rst version of the paper was presented at a seminar at the University of Cambridge, Cambridge, England 2006, and the author is especially thankful to Hashem Pesaran and Andrew Harvey for helpful comments, and at a seminar at Westminster Business School, London, England 2006. The paper has also been presented at the European Meeting of the Econometric Society (ESEM) Vienna, Austria 2006.