An evolutionary algorithm for the estimation of threshold vector error correction models
We develop an evolutionary algorithm to estimate Threshold Vector Error Correction models (TVECM) with more than two cointegrated variables. Since disregarding a threshold in cointegration models renders standard approaches to the estimation of the cointegration vectors inefficient, TVECM necessitate a simultaneous estimation of the cointegration vector(s) and the threshold. As far as two cointegrated variables are considered this is commonly achieved by a grid search. However, grid search quickly becomes computationally unfeasible if more than two variables are cointegrated. Therefore, the likelihood function has to be maximized using heuristic approaches. Depending on the precise problem structure the evolutionary approach developed in the present paper for this purpose saves 90 to 99 per cent of the computation time of a grid search.
(This abstract was borrowed from another version of this item.)
Volume (Year): 8 (2011)
Issue (Month): 4 (December)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/international+economics/journal/10368/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Balke, Nathan S. & Fomby, Thomas B., 1992.
9209, Federal Reserve Bank of Dallas.
- Winker, Peter & Gilli, Manfred, 2004. "Applications of optimization heuristics to estimation and modelling problems," Computational Statistics & Data Analysis, Elsevier, vol. 47(2), pages 211-223, September.
- Jaya Krishnakumar & David Neto, 2009. "Estimation and Testing for the Cointegration Rank in a Threshold Cointegrated System," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 2009.01, Institut d'Economie et Econométrie, Université de Genève.
- Manfred Gilli & Peter Winker, 2008.
"Review of Heuristic Optimization Methods in Econometrics,"
- Manfred GILLI & Peter WINKER, . "A review of heuristic optimization methods in econometrics," Swiss Finance Institute Research Paper Series 08-12, Swiss Finance Institute.
- Doherr, Thorsten & Czarnitzki, Dirk, 2002. "Genetic algorithms: a tool for optimization in econometrics - basic concept and an example for empirical applications," ZEW Discussion Papers 02-41, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Zhongjun Qu & Pierre Perron, 2006.
"A Modified Information Criterion for Cointegration Tests based on a VAR Approximation,"
Boston University - Department of Economics - Working Papers Series
WP2006-011, Boston University - Department of Economics.
- Qu, Zhongjun & Perron, Pierre, 2007. "A Modified Information Criterion For Cointegration Tests Based On A Var Approximation," Econometric Theory, Cambridge University Press, vol. 23(04), pages 638-685, August.
- Hansen, Bruce E. & Seo, Byeongseon, 2002.
"Testing for two-regime threshold cointegration in vector error-correction models,"
Journal of Econometrics,
Elsevier, vol. 110(2), pages 293-318, October.
- Tom Doan, . "RATS programs to replicate Hansen/Seo paper on threshold cointegration," Statistical Software Components RTZ00092, Boston College Department of Economics.
- Serena Ng & Pierre Perron, 2001.
"LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power,"
Econometric Society, vol. 69(6), pages 1519-1554, November.
- Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
- Jamie Gascoigne, 2004. "Estimating threshold vector error-correction models with multiple cointegrating relationships," Working Papers 2004013, The University of Sheffield, Department of Economics, revised Nov 2004.
- Dorsey, Robert E & Mayer, Walter J, 1995.
"Genetic Algorithms for Estimation Problems with Multiple Optima, Nondifferentiability, and Other Irregular Features,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 13(1), pages 53-66, January.
- Michael B. Gordy, . "GA.M: A Matlab routine for function maximization using a Genetic Algorithm," Matlab codes ga, , revised 12 Feb 1996.
- Gonzalo, JesÃ¹s & Pitarakis, Jean-Yves, 2005. "Threshold effects In multivariate error correction models," Discussion Paper Series In Economics And Econometrics 0501, Economics Division, School of Social Sciences, University of Southampton.
- Baragona, R. & Battaglia, F. & Cucina, D., 2004. "Fitting piecewise linear threshold autoregressive models by means of genetic algorithms," Computational Statistics & Data Analysis, Elsevier, vol. 47(2), pages 277-295, September.
When requesting a correction, please mention this item's handle: RePEc:kap:iecepo:v:8:y:2011:i:4:p:341-362. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.