Partial cointegrated vector autoregressive models with structural breaks in deterministic terms

This paper proposes a class of partial cointegrated models allowing for structural breaks in their deterministic terms. Details of the proposed models and their moving-average representations are examined. It is then shown that, under the assumption of martingale di§erence innovations, the limit distributions of partial quasi-likelihood ratio tests for cointegrating rank have a close connection to those for standard full models. This connection facilitates a response surface analysis which is required to extract critical information about moments from large-scale simulation studies. An empirical illustration of the proposed methodology is also provided. This paper renders partial cointegrated models more áexible and reliable devices for the study of non-stationary time series data with structural breaks.