How the Removal of Deposit Rate Ceilings Has Changed Monetary Transmission in the US: Theory and Evidence
AbstractA test for the cointegrating rank of a vector autoregressive (VAR) process with a possible shift and broken linear trend is proposed. The break point is assumed to be known. The setup is a VAR process for cointegrated variables. The tests are not likelihood ratio tests but the deterministic terms including the broken trends are removed first by a GLS procedure and a likelihood ratio type test is applied to the adjusted series. The asymptotic null distribution of the test is derived and it is shown by a Monte Carlo experiment that the test has better small sample properties in many cases than a corresponding Gaussian likelihood ratio test for the cointegrating rank.
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Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2006/34.
Date of creation: 2006
Date of revision:
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Cointegration; structural break; vector autoregressive process; error correction model;
Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-28 (All new papers)
- NEP-CBA-2007-01-28 (Central Banking)
- NEP-ECM-2007-01-28 (Econometrics)
- NEP-MON-2007-01-28 (Monetary Economics)
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