A Note on Nonlinear Cointegration, Misspecification and Bimodality
We show that the asymptotic distribution of the ordinary least squares estimator in a cointegration regression may be bimodal. A simple case arises when the intercept is erroneously omitted from the estimated model or in nonlinear-in-variables models with endogenous regressors. In the latter case, a solution is to use an instrumental variable estimator. The core results in this paper also generalises to more complicated nonlinear models involving integrated time series.
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- Ibragimov, Rustam & Phillips, Peter C.B., 2008.
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