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Estimating threshold vector error-correction models with multiple cointegrating relationships

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Author Info
Jamie Gascoigne () (Department of Economics, The University of Sheffield)
Abstract

Hansen and Seo (2002) outline procedures to test for threshold cointegration, and to estimate a bi-variate model. However, in their conclusion they note that future research will have to find a way of estimating larger systems with multiple cointegrating vectors. This paper proposes a new algorithm that can be used to estimate such models. Simulation experiments are used to compare the algorithm´s performance with that of Hansen and Seo, and a practical application to the term structure of UK interest rates is also presented.

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File URL: http://www.shef.ac.uk/content/1/c6/03/91/71/SERP2004013.pdf
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File Function: First version, 2004
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File URL: http://www.shef.ac.uk/content/1/c6/03/91/71/SERP2004013.pdf
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File Function: Revised version, 2004
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Publisher Info
Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2004013.

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Length: 16 pages
Date of creation: Nov 2004
Date of revision: Nov 2004
Handle: RePEc:shf:wpaper:2004013

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Related research
Keywords: Nonlinearity; Cointegration; Term Structure.;

Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions

References listed on IDEAS
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  1. Hansen, Bruce E. & Seo, Byeongseon, 2002. "Testing for two-regime threshold cointegration in vector error-correction models," Journal of Econometrics, Elsevier, vol. 110(2), pages 293-318, October. [Downloadable!] (restricted)
  2. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March. [Downloadable!] (restricted)
    Other versions:
  3. 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.
    Other versions:
  4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
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