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Time-varying cointegration with an application to the UK Great Ratios

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  • Kapetanios, George
  • Millard, Stephen
  • Petrova, Katerina
  • Price, Simon

Abstract

We build on an estimation method which can accommodate time variation in a cointegrating relationship and present a test for cointegration under this setup. We apply our test procedure to the UK Great Ratios and find little evidence for cointegration when the parameters are assumed constant, but strong evidence when allowing them to drift slowly over time.

Suggested Citation

  • Kapetanios, George & Millard, Stephen & Petrova, Katerina & Price, Simon, 2020. "Time-varying cointegration with an application to the UK Great Ratios," Economics Letters, Elsevier, vol. 193(C).
    • Handle: RePEc:eee:ecolet:v:193:y:2020:i:c:s0165176520301543
    DOI: 10.1016/j.econlet.2020.109213
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    References listed on IDEAS

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    3. Yicong Lin & Mingxuan Song, 2023. "Robust bootstrap inference for linear time-varying coefficient models: Some Monte Carlo evidence," Tinbergen Institute Discussion Papers 23-049/III, Tinbergen Institute.

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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