Quasi-likelihood ratio tests for cointegration, cobreaking, and cotrending

We consider a set of variables with two types of nonstationary features, stochastic trends and broken linear trends. We develop tests that can determine whether there is a linear combination of these variables under which the nonstationary features can be canceled out. The first test can determine w...

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Bibliographic Details
Published inEconometric reviews Vol. 38; no. 8; pp. 881 - 898
Main Authors Carrion-i-Silvestre, Josep Lluís, Kim, Dukpa
Format Journal Article
LanguageEnglish
Published New York Taylor & Francis 14.09.2019
Taylor & Francis Ltd
Taylor and Francis
Subjects
Analyse stochastique
Anàlisi estocàstica
Cobreaking
cointegration
Cointegration analysis
cotrending
Econometrics
Economic integration
Integració econòmica
Likelihood ratio
Linear programming
Monte Carlo method
multiple structural breaks
Mètode de Montecarlo
Programació lineal
Regression analysis
Trends
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Summary:We consider a set of variables with two types of nonstationary features, stochastic trends and broken linear trends. We develop tests that can determine whether there is a linear combination of these variables under which the nonstationary features can be canceled out. The first test can determine whether stochastic trends can be eliminated and thus whether cointegration holds, regardless of whether structural breaks in linear trends are eliminated. The second test can determine whether both stochastic trends and breaks in linear trends are simultaneously removed and thus whether cointegration and cobreaking simultaneously hold. The third test can determine whether not only breaks in linear trends but also linear trends themselves are eliminated along with stochastic trends and thus whether both cointegration and cotrending hold.
ISSN:0747-4938
1532-4168
DOI:10.1080/07474938.2018.1528416