Vasco J. Gabriel () (Universidade do Minho - NIPE, Birkbeck College, University of London) Luis F. Martins () (Instituto Superior de Ciências do Trabalho e da Empresa, UNIDE)
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In this paper we examine, by means of Monte Carlo simulation, the properties of several cointegration tests when long run parameters are subject to structural changes. We allow for different types of stochastic and deterministic regime shifts, more specifically, changes governed by Markov chains, martingale parameter variation, sudden multiple breaks and gradual changes. Our Monte Carlo analysis reveals that tests with cointegration as the null hypothesis perform badly, while tests with the null of no cointegration retain much of their usefulness in this context.
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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number
1/2000.
Find related papers by JEL classification: C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
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