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A Sufficient Statistical Test for Dynamic Stability

Author

Listed:
  • Ahmed, Muhammad Ashfaq
  • Nawaz, Nasreen
Abstract
In the existing Statistics and Econometrics literature, there does not exist a statistical test which may test for all kinds of roots of the characteristic polynomial leading to an unstable dynamic response, i.e., positive and negative real unit roots, complex unit roots and the roots lying inside the unit circle. This paper develops a test which is sufficient to prove dynamic stability (in the context of roots of the characteristic polynomial) of a univariate as well as a multivariate time series without having a structural break. It covers all roots (positive and negative real unit roots, complex unit roots and the roots inside the unit circle whether single or multiple) which may lead to an unstable dynamic response. Furthermore, it also indicates the number of roots causing instability in the time series. The test is much simpler in its application as compared to the existing tests as the series is strictly stationary under the null.

Suggested Citation

  • Ahmed, Muhammad Ashfaq & Nawaz, Nasreen, 2023. "A Sufficient Statistical Test for Dynamic Stability," MPRA Paper 116684, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:116684
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Dynamic stability; Real and complex roots; Unit circle;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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