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A Unit Root Test with Markov Switching Deterministic Components: A Special Emphasis on Nonlinear Optimization Algorithms

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dc.contributor.author Omay, Tolga
dc.contributor.author Çorakçı, Ayşegül
dc.date.accessioned 2024-05-27T11:54:49Z
dc.date.available 2024-05-27T11:54:49Z
dc.date.issued 2023
dc.identifier.citation Omay, Tolga; Çorakçı, Ayşegül (2023). "A Unit Root Test with Markov Switching Deterministic Components: A Special Emphasis on Nonlinear Optimization Algorithms", Computational Economics. tr_TR
dc.identifier.issn 0927-7099
dc.identifier.uri http://hdl.handle.net/20.500.12416/8407
dc.description.abstract In this study, we investigate the performance of different optimization algorithms in estimating the Markov switching (MS) deterministic components of the traditional ADF test. For this purpose, we consider Broyden, Fletcher, Goldfarb, and Shanno (BFGS), Berndt, Hall, Hall, Hausman (BHHH), Simplex, Genetic, and Expectation-Maximization (EM) algorithms. The simulation studies show that the Simplex method has significant advantages over the other commonly used hill-climbing methods and EM. It gives unbiased estimates of the MS deterministic components of the ADF unit root test and delivers good size and power properties. When Hamilton’s (Econometrica 57:357–384, 1989) MS model is re-evaluated in conjunction with the alternative algorithms, we furthermore show that Simplex converges to the global optima in stationary MS models with remarkably high precision and even when convergence criterion is raised, or initial values are altered. These advantages of the Simplex routine in MS models allow us to contribute to the current literature. First, we produce the exact critical values of the generalized ADF unit root test with MS breaks in trends. Second, we derive the asymptotic distribution of this test and provide its invariance feature. © 2023, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature. tr_TR
dc.language.iso eng tr_TR
dc.relation.isversionof 10.1007/s10614-023-10501-4 tr_TR
dc.rights info:eu-repo/semantics/closedAccess tr_TR
dc.subject Markov Switching Model tr_TR
dc.subject Optimization Algorithm tr_TR
dc.subject Unit Root tr_TR
dc.title A Unit Root Test with Markov Switching Deterministic Components: A Special Emphasis on Nonlinear Optimization Algorithms tr_TR
dc.type article tr_TR
dc.relation.journal Computational Economics tr_TR
dc.contributor.authorID 103299 tr_TR
dc.contributor.department Çankaya Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, Ekonomi Bölümü tr_TR


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