A threshold cointegration test with increased power
AbstractThe low power of threshold, or asymmetric, cointegration tests is addressed. A new test is developed which combines momentum-threshold autoregression (MTAR) and local-to-unity detrending via generalised least squares (GLS). Critical values for the newly proposed GLS-MTAR threshold cointegration test are provided under alternative decisions regarding the deterministic terms employed when implementing the test. Simulation analysis of the test shows it to provide a substantial increase in power relative to the previously proposed MTAR threshold cointegration test of Enders and Siklos [W. Enders, P. Siklos, Cointegration and threshold adjustment, J. Business Econ. Statist. 19 (2001) 166–176].
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Bibliographic InfoArticle provided by Elsevier in its journal Mathematics and Computers in Simulation (MATCOM).
Volume (Year): 73 (2007)
Issue (Month): 6 ()
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Web page: http://www.journals.elsevier.com/mathematics-and-computers-in-simulation/
Cointegration; Threshold adjustment; Asymmetry; Monte Carlo simulation; Test power;
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