Nuisance parameter free inference on cointegration parameters in the presence of a variance shift
Kourogenis and Pittis (2008) show that the presence of a variance shift implies that the OLS t-statistic in a triangular cointegrated model displays asymptotic size distortions. For the same model, this paper provides two simple solutions to the size problems, the first based on White (1980) standard errors, the second based on the wild bootstrap.
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- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
- Kourogenis, Nikolaos & Pittis, Nikitas, 2008. "Cointegration, variance shifts and the limiting distribution of the OLS estimator," Economics Letters, Elsevier, vol. 99(1), pages 103-106, April.
- Cavaliere, Giuseppe & Taylor, A.M. Robert, 2008. "Bootstrap Unit Root Tests For Time Series With Nonstationary Volatility," Econometric Theory, Cambridge University Press, vol. 24(01), pages 43-71, February.