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Testing the "Inaction Corridor" in a Three-Regime TVECM

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  • Jaya Krishnakumar
  • David Neto

Abstract

In this note, we investigate a test for the existence of a middle "band of inaction" in a three-regime threshold vector error correction model (TVECM). For this purpose we propose a supremum Wald statistic, derive its limiting distribution and calculate its critical values through simulations.

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File URL: http://www.unige.ch/ses/dsec/repec/files/2009_04.pdf
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Bibliographic Info

Paper provided by Département des Sciences Économiques, Université de Genève in its series Research Papers by the Department of Economics, University of Geneva with number 2009.04.

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Length: 9 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:gen:geneem:2009.04

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Related research

Keywords: Threshold cointegration; Threshold Unit Root process; Sup-Wald statistic; TVECM;

References

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  1. Nathan S. Balke & Thomas B. Fomby, 1992. "Threshold cointegration," Research Paper 9209, Federal Reserve Bank of Dallas.
    • Balke, Nathan S & Fomby, Thomas B, 1997. "Threshold Cointegration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 627-45, August.
  2. Mehmet Caner & Bruce E. Hansen, 2001. "Threshold Autoregression with a Unit Root," Econometrica, Econometric Society, vol. 69(6), pages 1555-1596, November.
  3. George Kapetanios & Yongcheol Shin, 2004. "Unit Root Tests in Three-Regime SETAR Models," ESE Discussion Papers 104, Edinburgh School of Economics, University of Edinburgh.
  4. Gonzalo, Jesùs & Pitarakis, Jean-Yves, 2005. "Threshold effects In multivariate error correction models," Discussion Paper Series In Economics And Econometrics 0501, Economics Division, School of Social Sciences, University of Southampton.
  5. Robert B. Davies, 2002. "Hypothesis testing when a nuisance parameter is present only under the alternative: Linear model case," Biometrika, Biometrika Trust, vol. 89(2), pages 484-489, June.
  6. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-76, April.
  7. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
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