Detection of Non-Linearity in the Time Series Using BDS Test

The need to determine the status of the series is a very important issue that must be addressed before embarking on the statistical analysis of such series; this paper therefore, examines the status of the commercial bank savings in Nigeria. From the analysis we discovered that at level the series was not stationary as shown in figure1, however at the first difference (figure2) the series was stationary, so also the unit root test applied shows that at level the series was not stationary (table1) but at first difference it was stationary (table2) and this actually paved way for the application of BrockDechert-Scheinkman (table3) test which actually revealed that this series could be best estimated by the use of non-linear model as the null hypothesis of linearity of the series was out rightly rejected and the alternative was accepted. The importance of this result lies on the fact that it guides against model misspecification as using linear model to estimate the parameter of the non-linear model will result in model judgmental error.