In this paper, we examine the interaction between data transformation and the empirical evidence obtained when testing for (non-)linearity. For this purpose we examine nonlinear features in 64 monthly and 53 quarterly US macroeconomic variables for a range of Box–Cox data transformations. Our general finding is that evidence of nonlinearity is not independent of the data transformation. Results of simulation experiments substantiate this finding.

Additional Metadata
Keywords Box–Cox transformation, nonlinearity
Persistent URL dx.doi.org/10.1016/S0167-9473(02)00054-3, hdl.handle.net/1765/13534
Journal Computational Statistics & Data Analysis
Citation
Franses, Ph.H.B.F, & de Bruin, P. (2002). On data transformations and evidence of nonlinearity. Computational Statistics & Data Analysis, 40(3), 621–632. doi:10.1016/S0167-9473(02)00054-3