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Functional-coefficient cointegration models

  • Xiao, Zhijie

This paper studies estimation and inference of functional coefficient cointegration models. The proposed model offers a more flexible structure of cointegration where the value of cointegrating coefficients may be affected by informative covariates and thus may vary over time. The model may be viewed as a stochastic cointegration model and includes the conventional cointegration model as a special case. The proposed new model provides a useful complement to the conventional fixed coefficient cointegration models. Both kernel and local polynomial estimators are investigated. Inference procedures for instability of cointegrating parameters and a test for cointegration are proposed based on the functional-coefficient estimates. Limiting distributions of the estimates and testing statistics are derived.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 152 (2009)
Issue (Month): 2 (October)
Pages: 81-92

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Handle: RePEc:eee:econom:v:152:y:2009:i:2:p:81-92
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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