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Separate cointegration in a VAR system subject to structural breaks

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  • Kurita, Takamitsu

Abstract

This note demonstrates that the analysis of separate cointegration can be facilitated by properly allowing for regime shifts in the underlying data generation process. A vector autoregressive (VAR) model is reformulated in such a way that it is subject to deterministic breaks and also contains the structure of separate cointegration. A comparative empirical study shows the advantage of the proposed VAR model over the standard model in revealing the structure.

Suggested Citation

  • Kurita, Takamitsu, 2019. "Separate cointegration in a VAR system subject to structural breaks," Economics Letters, Elsevier, vol. 179(C), pages 19-23.
    • Handle: RePEc:eee:ecolet:v:179:y:2019:i:c:p:19-23
    DOI: 10.1016/j.econlet.2019.03.013
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    References listed on IDEAS

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    1. Picci, Lucio, 2001. "Explaining Long- and Short-Run Interactions in Time Series Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 85-94, January.
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    4. Harbo, Ingrid, et al, 1998. "Asymptotic Inference on Cointegrating Rank in Partial Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 388-399, October.
    5. Søren Johansen & Rocco Mosconi & Bent Nielsen, 2000. "Cointegration analysis in the presence of structural breaks in the deterministic trend," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 216-249.
    6. Takamitsu Kurita, 2007. "A dynamic econometric system for the real yen–dollar rate," Empirical Economics, Springer, vol. 33(1), pages 115-149, July.
    7. Granger, Clive W J & Haldrup, Niels, 1997. "Separation in Cointegrated Systems and Persistent-Transitory Decompositions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 449-463, November.
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    More about this item

    Keywords

    Separate cointegration; Vector autoregressive (VAR) models; Deterministic breaks;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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