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ADL tests for threshold cointegration

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  • Jing Li
  • Junsoo Lee

Abstract

In this article, we propose new tests for threshold cointegration using an autoregressive distributed lag (ADL) model. The indicators in the threshold model can adopt either a nonstationary or stationary threshold variable. The cointegrating vector is not prespecified in this article. We adopt a supremum Wald type test to account for the so-called Davies (1987, Biometrika 74 ,33) problem. The asymptotic null distributions of the proposed tests are free of nuisance parameters. As such, a bootstrap procedure is not required and the critical values of the proposed tests are tabulated. Monte Carlo experiments show good finite-sample performance. Copyright Copyright 2010 Blackwell Publishing Ltd

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Time Series Analysis.

Volume (Year): 31 (2010)
Issue (Month): 4 (07)
Pages: 241-254

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Handle: RePEc:bla:jtsera:v:31:y:2010:i:4:p:241-254

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Cited by:
  1. Sonali Das & Rangan Gupta & Patrick T. Kanda & Monique Reid & Christian K. Tipoy & Mulatu F. Zerihun, 2012. "Real Interest Rate Persistence in South Africa: Evidence and Implications," Working Papers 17/2012, Stellenbosch University, Department of Economics.
  2. Asier Minondo & Francisco Requena, 2012. "Exporters' characteristics and the margins of trade," Economics and Business Letters, Oviedo University Press, Oviedo University Press, vol. 1(2).
  3. Peter Sephton & Janelle Mann, 2013. "Threshold Cointegration: Model Selection with an Application," Journal of Economics and Econometrics, Economics and Econometrics Research Institute (EERI), Brussels, Economics and Econometrics Research Institute (EERI), Brussels, vol. 56(2), pages 54-77.
  4. Tsangyao Chang & Chia-hao Lee & Guochen Pan, 2012. "Purchasing Power Parity in African Countries: Further Evidence based on the ADL Test for Threshold Cointegration," Economics Bulletin, AccessEcon, vol. 32(1), pages 220-228.
  5. Wen-Yi Chen, 2013. "Does Housing Cost Affect Birth Rates in Taiwan? The ADL Test for Threshold Co-integration," Journal for Economic Forecasting, Institute for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 90-103, October.
  6. Tsangyao Chang & Chia-hao Lee & Pei-I Chou, 2011. "Purchasing power parity in G-7 countries: Further evidence based on ADL test for threshold cointegration," Economics Bulletin, AccessEcon, vol. 31(2), pages 1172-1182.

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