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ADL tests for threshold cointegration

  • Jing Li
  • Junsoo Lee

In this article, we propose new tests for threshold cointegration using an autoregressive distributed lag (ADL) model. The indicators in the threshold model can adopt either a nonstationary or stationary threshold variable. The cointegrating vector is not prespecified in this article. We adopt a supremum Wald type test to account for the so-called Davies (1987, Biometrika 74 ,33) problem. The asymptotic null distributions of the proposed tests are free of nuisance parameters. As such, a bootstrap procedure is not required and the critical values of the proposed tests are tabulated. Monte Carlo experiments show good finite-sample performance. Copyright Copyright 2010 Blackwell Publishing Ltd

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9892.2010.00659.x
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Article provided by Wiley Blackwell in its journal Journal of Time Series Analysis.

Volume (Year): 31 (2010)
Issue (Month): 4 (07)
Pages: 241-254

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Handle: RePEc:bla:jtsera:v:31:y:2010:i:4:p:241-254
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