Non-linear quantile unit root test and PPP: more evidence from Africa

Purpose – This paper aims to investigate, with the view to determine the effectiveness of blueprints that are designed to boost hydroelectricity use, the unit root properties of hydroelectricity consumption in 50 countries for the period from 1965 to 2012. Design/methodology/approach – A newly proposed non-linear unit root test is used for the purpose of estimations. Findings – The results show that 26 countries (which are mostly developing countries) or 52 per cent of the total sample have unit roots in their hydroelectricity consumption series. Practical implications – The policy implication of these results is that policies associated with the enhancement of hydroelectric power use are likely to be effective in several cases, especially in the developing countries. Originality/value – The main contribution of this paper is that we estimate the non-stationarity of hydroelectricity series within a non-linearity framework. Failure to use a non-linearity method in the presence of non-linear data-generation processes will create biased inferences and wrong policy implications.

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A revisit to the non-linear mean reversion of real exchange rates: Evidence from a series-specific non-linear panel unit-root test

Journal of Macroeconomics ◽

10.1016/j.jmacro.2008.12.002 ◽

2009 ◽

Vol 31 (4) ◽

pp. 591-601 ◽

Cited By ~ 15

Author(s):

Jyh-Lin Wu ◽

Hsiu-Yun Lee

Keyword(s):

Exchange Rates ◽

Unit Root ◽

Real Exchange Rates ◽

Unit Root Test ◽

Mean Reversion ◽

Panel Unit Root Test ◽

Panel Unit Root ◽

Non Linear

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Bayesian Unit Root Test for AR(1) Model with Trend Approximated

Statistics Optimization & Information Computing ◽

10.19139/soic-2310-5070-786 ◽

2020 ◽

Vol 8 (2) ◽

pp. 425-461

Author(s):

Jitendra Kumar ◽

Varun Varun ◽

Dhirendra Kumar ◽

Anoop Chaturvedi

Keyword(s):

Unit Root ◽

Time Trend ◽

Spline Function ◽

Linear Time ◽

Linear Trend ◽

Unit Root Test ◽

Posterior Odds ◽

Linear Time Trend ◽

Proposed Model ◽

Non Linear

The objective of present study is to develop a time series model for handling the non-linear trend process using a spline function. Spline function is a piecewise polynomial segment concerning the time component. The main advantage of spline function is the approximation, non linear time trend, but linear time trend between the consecutive join points. A unit root hypothesis is projected to test the non stationarity due to presence of unit root in the proposed model. In the autoregressive model with linear trend, the time trend vanishes under the unit root case. However, when non-linear trend is present and approximated by the linear spline function, through the trend component is absent under the unit root case, but the intercept term makes a shift with r knots. For decision making under the Bayesian perspective, the posterior odds ratio is used for hypothesis testing problems. We have derived the posterior probability for the assumed hypotheses under appropriate prior information. A simulation study and an empirical application are presented to examine the performance of theoretical outcomes.

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Non-linear approach to Random Walk Test in selected African countries

International Journal of Managerial Finance ◽

10.1108/ijmf-10-2017-0235 ◽

2018 ◽

Vol 14 (3) ◽

pp. 362-376 ◽

Cited By ~ 2

Author(s):

Emmanuel Joel Aikins Abakah ◽

Paul Alagidede ◽

Lord Mensah ◽

Kwaku Ohene-Asare

Keyword(s):

South Africa ◽

Random Walk ◽

Stock Market ◽

Market Efficiency ◽

Unit Root ◽

Unit Root Test ◽

Weak Form ◽

African Countries ◽

Content Type ◽

Non Linear

Purpose The purpose of this paper is to re-examine the weak form efficiency of five African stock markets (South Africa, Nigeria, Egypt, Ghana and Mauritius) using various tests to assess the impact of non-linearity effect and thin trading which are prevalent in African markets on market efficiency. Design/methodology/approach The weekly returns of S&P/IFC return indices for five African countries over the period 2000-2013 were obtained from DataStream and analyzed. The study adopted the newly developed Non-Linear Fourier unit root test advanced by Enders and Lee (2004, 2009) which allows for an unknown number of structural breaks with unknown functional forms and non-linearity in data generating process of stock prices series to test the Random Walk Hypothesis (RWH) for the five markets, and an augment regression model. Findings In light of the empirical evidence the author(s) using Non-linear Fourier Unit Root Test only fail to reject the RWH for South Africa, Nigeria and Egypt leading to the conclusion that these markets follow the RWH and weak-form efficient whilst Ghana and Mauritius are weak-form inefficient. Besides, evaluating non-linear models without adjusting for thin trading effect shows that, South Africa and Ghana markets are weak-form efficient while Nigeria, Egypt and Mauritius are not. However, after accounting for thin trading effect, the author(s) find that South Africa and Egypt markets follow the RWH. The findings imply that market efficiency results depend on the methodology used. Originality/value This paper provides further evidence on stock market efficiency in emerging markets. The finding suggests that thin trading and non-linearity effect influences markets efficiency tests in African stock markets. Thus, recent structural adjustment and liberalization policies have not enhanced stock market operations in Africa. This paper therefore has implications for policy makers and international investors.

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