Functional cointegration: definition and nonparametric estimation
AbstractWe formally define a concept of functional cointegration linking the dynamics of two time series via a functional coefficient. This is achieved through the use of a concept of summability as an alternative to I(1)'ness which is no longer suitable under nonlinear dynamics. We subsequently introduce a nonparametric approach for estimating the unknown functional coefficients. Our method is based on a piecewise local least squares principle and is computationally simple to implement. We establish its consistency properties and evaluate its performance in finite samples.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 38846.
Date of creation: May 2012
Date of revision:
Functional Coefficients; Unit Roots; Cointegration; Piecewise Local Linear Estimation;
Find related papers by JEL classification:
- C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-22 (All new papers)
- NEP-ECM-2012-05-22 (Econometrics)
- NEP-ETS-2012-05-22 (Econometric Time Series)
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