Author(s)

Muhammad Ashfaq Ahmed, Nasreen Nawaz

Federal Board of Revenue, Islamabad, Pakistan.

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 (C01, C12).

Dynamic Stability, Real and Complex Roots, Unit Circle

Ahmed, M. and Nawaz, N. (2023) A Sufficient Statistical Test for Dynamic Stability. Journal of Data Analysis and Information Processing, 11, 144-174. doi: 10.4236/jdaip.2023.112009.