A new version of this entry is available:

Loading...
Thumbnail Image
ResearchPaper
2018

Testing for cointegration with threshold adjustment in the presence of structural breaks

Abstract (English)

In this paper, we develop new threshold cointegration tests with SETAR and MTAR adjustment allowing for the presence of structural breaks in the equilibrium equation. We propose a simple procedure to simultaneously estimate the previously unknown breakpoint and test the null hypothesis of no cointegration. Thereby, we extend the well-known residual-based cointegration test with regime shift introduced by Gregory and Hansen (1996a) to include forms of nonlinear adjustment. We derive the asymptotic distribution of the test statistics and demonstrate the finite-sample performance of the tests in a series of Monte Carlo experiments. We find a substantial decrease of power of the conventional threshold cointegration tests caused by a shift in the slope coefficient of the equilibrium equation. The proposed tests perform superior in these situations. An application to the ‘rockets and feathers’ hypothesis of price adjustment in the US gasoline market provides empirical support for this methodology.

File is subject to an embargo until

This is a new version of:

Notes

Publication license

Publication series

Hohenheim discussion papers in business, economics and social sciences; 2018,07

Published in

Faculty
Faculty of Business, Economics and Social Sciences
Institute
Institute of Economics

Examination date

Supervisor

Edition / version

Citation

DOI

ISSN

ISBN

Language
English

Publisher

Publisher place

Classification (DDC)
330 Economics

Original object

Standardized keywords (GND)

BibTeX

@techreport{Schweikert2018, url = {https://hohpublica.uni-hohenheim.de/handle/123456789/6263}, author = {Schweikert, Karsten}, title = {Testing for cointegration with threshold adjustment in the presence of structural breaks}, year = {2018}, school = {Universität Hohenheim}, series = {Hohenheim discussion papers in business, economics and social sciences}, }