Threshold effects in cointegrating relationships
Threshold effects in cointegrating relationships
In this paper, we introduce threshold-type nonlinearities within a single-equation cointegrating regression model and propose a testing procedure for testing the null hypothesis of linear cointegration vs. cointegration with threshold effects. Our framework allows the modelling of long-run equilibrium relationships that may change according to the magnitude of a threshold variable assumed to be stationary and ergodic, and thus constitutes an attempt to deal econometrically with the potential presence of multiple equilibria. The framework is flexible enough to accommodate regressor endogeneity and serial correlation.
nonlinear cointegration, multiple long run equilibria, thresholds, nonlinear dynamics, unit roots
813-833
Gonzalo, Jesús
48015f9d-eef0-4ebd-8f2b-cbe7aa0cf667
Pitarakis, Jean-Yves
ee5519ae-9c0f-4d79-8a3a-c25db105bd51
1 December 2006
Gonzalo, Jesús
48015f9d-eef0-4ebd-8f2b-cbe7aa0cf667
Pitarakis, Jean-Yves
ee5519ae-9c0f-4d79-8a3a-c25db105bd51
Gonzalo, Jesús and Pitarakis, Jean-Yves
(2006)
Threshold effects in cointegrating relationships.
Oxford Bulletin of Economics and Statistics, 68 (S1), .
(doi:10.1111/j.1468-0084.2006.00458.x).
Abstract
In this paper, we introduce threshold-type nonlinearities within a single-equation cointegrating regression model and propose a testing procedure for testing the null hypothesis of linear cointegration vs. cointegration with threshold effects. Our framework allows the modelling of long-run equilibrium relationships that may change according to the magnitude of a threshold variable assumed to be stationary and ergodic, and thus constitutes an attempt to deal econometrically with the potential presence of multiple equilibria. The framework is flexible enough to accommodate regressor endogeneity and serial correlation.
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e-pub ahead of print date: 23 November 2006
Published date: 1 December 2006
Keywords:
nonlinear cointegration, multiple long run equilibria, thresholds, nonlinear dynamics, unit roots
Organisations:
Economics
Identifiers
Local EPrints ID: 35004
URI: http://eprints.soton.ac.uk/id/eprint/35004
ISSN: 0305-9049
PURE UUID: 7add9110-f8d5-42b9-a185-e909aa479323
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Date deposited: 17 May 2006
Last modified: 16 Mar 2024 03:32
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Author:
Jesús Gonzalo
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