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A statistical analysis of regime switching under asymmetric error correction

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  • Steven Cook
  • Sean Holly

Abstract

A novel approach is presented for the analysis of regime switching behaviour based upon the use of Geary's runs test. The proposed method is used to examine recent evidence presented concerning the application of alternative models of asymmetric error correction. The results derived show the runs test to detect a significant difference in regime switching behaviour under the rival models.

Suggested Citation

  • Steven Cook & Sean Holly, 2002. "A statistical analysis of regime switching under asymmetric error correction," Applied Economics Letters, Taylor & Francis Journals, vol. 9(4), pages 275-278.
    • Handle: RePEc:taf:apeclt:v:9:y:2002:i:4:p:275-278
    DOI: 10.1080/13504850110065830
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    References listed on IDEAS

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    1. Granger, C W J & Lee, T H, 1989. "Investigation of Production, Sales and Inventory Relationships Using Multicointegration and Non-symmetric Error Correction Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages 145-159, Supplemen.
    2. Steven Cook, 2000. "Frequency domain and time series properties of asymmetric error correction terms," Applied Economics, Taylor & Francis Journals, vol. 32(3), pages 297-304.
    3. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-692, December.
    4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    5. Escribano, Alvaro & Pfann, Gerard A., 1998. "Non-linear error correction, asymmetric adjustment and cointegration," Economic Modelling, Elsevier, vol. 15(2), pages 197-216, April.
    6. Steven Cook & Sean Holly & Paul Turner, 1999. "DHSY revisited: the role of asymmetries," Applied Economics, Taylor & Francis Journals, vol. 31(7), pages 775-778.
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