Advanced Search
MyIDEAS: Login

Regime-Sensitive Cointegration With An Application To Interest-Rate Parity


Author Info



There exist a variety of reasons for the failure to find a uniquecointegrating relationship between economic time series where onewould normally be expected on the basis of economic theory. Amongthese are the testing procedure, the span of the data set, the choiceof lag length in generating the test statistic, the presence ofstructural breaks, and the presence of cointegration only beyond somethreshold. We propose the concept of regime-sensitive cointegrationwhereby the underlying series need not be cointegrated at all times.We show that cointegration can be switched off when a commonstochastic trend is added. Alternatively, cointegration can beswitched on or off because series normally believed to contain a unitactually do not. This implies that a linear combination of suchvariables need not be cointegrated. To illustrate the conceptempirically, we test the hypothesis of interest-rate parity, andrelated hypotheses, using daily Eurorates for the United States andCanada.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
File Function: link to article abstract page
Download Restriction: no

Bibliographic Info

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 1 (1997)
Issue (Month): 03 (September)
Pages: 640-657

as in new window
Handle: RePEc:cup:macdyn:v:1:y:1997:i:03:p:640-657_00

Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Web page:

Related research


Other versions of this item:

Find related papers by JEL classification:


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:1:y:1997:i:03:p:640-657_00. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.