On data transformations and evidence of nonlinearity
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.
|Keywords||(non-)linearity, data transformation, nonlinear features|
|Series||Econometric Institute Research Papers|
de Bruin, P, & Franses, Ph.H.B.F. (1998). On data transformations and evidence of nonlinearity (No. EI 9823). Econometric Institute Research Papers. Retrieved from http://hdl.handle.net/1765/1548