A nonlinear approach to testing the unit root null hypothesis: an application to international health expenditures

Paresh Kumar Narayan, Stephan Popp

Research output: Contribution to journalArticleResearchpeer-review

3 Citations (Scopus)

Abstract

In this article, we examine the unit root null hypothesis for per capita total Health Expenditures (HEs), per capita private HEs and per capita publicHEs for 29 Organization for Economic Co-operation and Development (OECD) countries. The novelty of our work is that we use a new nonlinear unit root test that allows for one structural break in the data series. We find that for around 45% of the countries, we are able to reject the unit root hypothesis for each of the three HE series. Moreover, using Monte Carlo simulations, we show that our proposed unit root model has better size and power properties than the widely used Augmented Dickey-Fuller (ADF) and Lagrange Multiplier (LM) type tests.

Original languageEnglish
Pages (from-to)163-175
Number of pages13
JournalApplied Economics
Volume44
Issue number2
DOIs
Publication statusPublished - Jan 2012
Externally publishedYes

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