IDEAS home Printed from https://ideas.repec.org/p/eui/euiwps/eco2004-21.html
   My bibliography  Save this paper

Break Date Estimation and Cointegration Testing in VAR Processes with Level Shift

Author

Listed:
  • Pentti SAIKKONEN
  • Helmut LUETKEPOHL
  • Carsten TRENKLER

Abstract

In testing for the cointegrating rank of a vector autoregressive (VAR) process it is important to take into account level shifts that have occurred in the sample period. Therefore the properties of estimators of the time period where a shift has taken place are investigated. The possible structural break is modelled as a simple shift in the level of the process. Three alternative estimators for the break date are considered and their asymptotic properties are derived under various assumptions regarding the size of the shift. In particular, properties of the shift date estimator are obtained under the assumption of an increasing or decreasing size of the shift when the sample size grows. Moreover, the implications for testing the cointegrating rank of the process are explored. A new rank test is proposed and its asymptotic properties are derived. It is shown that its asymptotic null distribution is una®ected by the level shift. The performance of the shift date estimators and the cointegration rank tests in small samples is investigated by simulations.

Suggested Citation

  • Pentti SAIKKONEN & Helmut LUETKEPOHL & Carsten TRENKLER, 2004. "Break Date Estimation and Cointegration Testing in VAR Processes with Level Shift," Economics Working Papers ECO2004/21, European University Institute.
    • Handle: RePEc:eui:euiwps:eco2004/21
    as

    Download full text from publisher

    File URL: http://www.iue.it/PUB/ECO2004-21.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    Citations

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


    Cited by:

    1. Khaled Chnaina & Farid Makhlouf, 2012. "Impact des Transferts de Fonds sur le Taux de Change Réel Effectif en Tunisie," Working papers of CATT hal-01885155, HAL.
    2. Naser, Hanan, 2014. "On the cointegration and causality between Oil market, Nuclear Energy Consumption, and Economic Growth: Evidence from Developed Countries," MPRA Paper 65252, University Library of Munich, Germany, revised 25 Mar 2015.
    3. Khaled Chnaina & Farid Makhlouf, 2015. "Impact des Transferts de Fonds sur le Taux de Change Réel Effectif en Tunisie," African Development Review, African Development Bank, vol. 27(2), pages 145-160, June.
    4. Franz Sinabell & Ulrich B. Morawetz & Carsten Holst, 2014. "Auslandskomponente des Lebensmittelmarktes in Österreich," WIFO Studies, WIFO, number 50911, February.
    5. Takamitsu Kurita & Mototsugu Shintani, 2023. "Johansen Test with Fourier-Type Smooth Nonlinear Trends in Cointegrating Relations," CIRJE F-Series CIRJE-F-1216, CIRJE, Faculty of Economics, University of Tokyo.
    6. Arsova, Antonia & Karaman Örsal, Deniz Dilan, 2021. "A panel cointegrating rank test with structural breaks and cross-sectional dependence," Econometrics and Statistics, Elsevier, vol. 17(C), pages 107-129.
    7. repec:agr:journl:v:3(604):y:2015:i:3(604):p:5-20 is not listed on IDEAS
    8. Naser, Hanan, 2015. "Analysing the long-run relationship among oil market, nuclear energy consumption, and economic growth: An evidence from emerging economies," Energy, Elsevier, vol. 89(C), pages 421-434.
    9. Walter Krämer, 2019. "Interview mit Helmut Lütkepohl," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 13(1), pages 87-94, April.
    10. Atle Oglend, Morten E. Lindbäck, and Petter Osmundsen, 2015. "Shale Gas Boom Affecting the Relationship Between LPG and Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    11. Maciej Wysocki & Cezary Wójcik, 2021. "Fiscal sustainability in the EU after the global crisis: Is there any progress? Evidence from Poland," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3997-4012, July.
    12. Maciej Wysocki & Cezary Wojcik & Andreas Freytag, 2022. "Populists and Fiscal Policy: The Case of Poland," Jena Economics Research Papers 2022-013, Friedrich-Schiller-University Jena.
    13. Kim, J.W. & Leatham, D.J. & Bessler, D.A., 2007. "REITs' dynamics under structural change with unknown break points," Journal of Housing Economics, Elsevier, vol. 16(1), pages 37-58, March.
    14. Bonga-Bonga, Lumengo & Biyase, Mduduzi, 2018. "The impact of Chinese textile imports on employment and value added in the manufacturing sector of the South African economy," MPRA Paper 88181, University Library of Munich, Germany.
    15. Khaled Chnaina & Farid Makhlouf, 2015. "Impact des Transferts de Fonds sur le Taux de Change Réel Effectif en Tunisie," African Development Review, African Development Bank, vol. 27(2), pages 145-160, June.

    More about this item

    Keywords

    Cointegration; Cointegrating rank test; Structural break; Vector autoregressive process; Error correction model;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eui:euiwps:eco2004/21. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Cécile Brière (email available below). General contact details of provider: https://edirc.repec.org/data/deiueit.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.