We extend the conventional cointegrated VAR model to allow for general nonlinear deterministic trends. These nonlinear trends can be used to model gradual structural changes in the intercept term of the cointegrating relations. A general asymptotic theory of estimation and statistical inference is reviewed and a diagnostic test for testing the correct specification of an employed nonlinear trend is developed. The methods are applied to Finnish interest rate data. A smooth level shift of the logistic form between the own-yield of broad money and the short-term money market rate is found appropriate for these data. The level shift is motivated by the deregulation of issuing certificates of deposit and its inclusion in the model solves the puzzle of 'missing cointegration vector' found in a previous study.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Find related papers by JEL classification: C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing