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Specification Testing for Nonlinear Multivariate Cointegrating Regressions

  • Chaohua Dong

    ()

  • Jiti Gao

    ()

  • Dag Tjostheim

    ()

  • Jiying Yin

    ()

Registered author(s):

This paper considers a general model specification test for nonlinear multivariate cointegrating regressions where the regressor consists of a univariate integrated time series and a vector of stationary time series. The regressors and the errors are generated from the same innovations, so that the model accommodates endogeniety. A new and simple test is proposed and the resulting asymptotic theory is established. The test statistic is constructed based on a natural distance function between a nonparametric estimate and a smoothed parametric counterpart. The asymptotic distribution of the test statistic under the parametric specification is proportional to that of a local-time random variable with a known distribution. In addition, the finite sample performance of the proposed test is evaluated through using both simulated and real data examples.

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File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2014/wp08-14.pdf
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Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 8/14.

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Length: 44
Date of creation: 2014
Date of revision:
Handle: RePEc:msh:ebswps:2014-8
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  1. Joon-Ho Hahm & Douglas G. Steigerwald, 1999. "Consumption Adjustment under Time-Varying Income Uncertainty," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 32-40, February.
  2. Ioannis Kasparis & Peter C.B. Phillips, 2009. "Dynamic Misspecification in Nonparametric Cointegrating Regression," Cowles Foundation Discussion Papers 1700, Cowles Foundation for Research in Economics, Yale University.
  3. Gao, Jiti, 2007. "Nonlinear time series: semiparametric and nonparametric methods," MPRA Paper 39563, University Library of Munich, Germany, revised 01 Sep 2007.
  4. Jiti Gao & Maxwell King & Zudi Lu & Dag Tjøstheim, 2009. "Nonparametric Specification Testing for Nonlinear Time Series with Nonstationarity," School of Economics Working Papers 2009-03, University of Adelaide, School of Economics.
  5. Yoosoon Chang & Joon Y. Park & Peter C. B. Phillips, 2001. "Nonlinear econometric models with cointegrated and deterministically trending regressors," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 1-36.
  6. Cai, Zongwu & Li, Qi & Park, Joon Y., 2009. "Functional-coefficient models for nonstationary time series data," Journal of Econometrics, Elsevier, vol. 148(2), pages 101-113, February.
  7. Gao, Jiti & Gijbels, Irène, 2008. "Bandwidth Selection in Nonparametric Kernel Testing," Journal of the American Statistical Association, American Statistical Association, vol. 103(484), pages 1584-1594.
  8. Gylfason, Thorvaldur, 1981. "Interest Rates, Inflation, and the Aggregate Consumption Function," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 233-45, May.
  9. Marmer, Vadim, 2009. "Nonlinearity, Nonstationarity, and Spurious Forecasts," Microeconomics.ca working papers vadim_marmer-2009-60, Vancouver School of Economics, revised 03 Nov 2009.
  10. Qiying Wang & Peter C. B. Phillips, 2009. "Structural Nonparametric Cointegrating Regression," Econometrica, Econometric Society, vol. 77(6), pages 1901-1948, November.
  11. Qi Li & Jeffrey Scott Racine, 2006. "Nonparametric Econometrics: Theory and Practice," Economics Books, Princeton University Press, edition 1, volume 1, number 8355.
  12. Qiying Wang & Peter C.B. Phillips, 2006. "Asymptotic Theory for Local Time Density Estimation and Nonparametric Cointegrating Regression," Cowles Foundation Discussion Papers 1594, Cowles Foundation for Research in Economics, Yale University.
  13. Gao, Jiti & Phillips, Peter C.B., 2013. "Semiparametric estimation in triangular system equations with nonstationarity," Journal of Econometrics, Elsevier, vol. 176(1), pages 59-79.
  14. Myklebust, Terje & Karlsen, Hans Arnfinn & Tjøstheim, Dag, 2012. "Null Recurrent Unit Root Processes," Econometric Theory, Cambridge University Press, vol. 28(01), pages 1-41, February.
  15. Xiao, Zhijie, 2009. "Functional-coefficient cointegration models," Journal of Econometrics, Elsevier, vol. 152(2), pages 81-92, October.
  16. Kasparis, Ioannis, 2008. "Detection Of Functional Form Misspecification In Cointegrating Relations," Econometric Theory, Cambridge University Press, vol. 24(05), pages 1373-1403, October.
  17. Hong, Seung Hyun & Phillips, Peter C. B., 2010. "Testing Linearity in Cointegrating Relations With an Application to Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(1), pages 96-114.
  18. Kasparis, Ioannis, 2010. "The Bierens test for certain nonstationary models," Journal of Econometrics, Elsevier, vol. 158(2), pages 221-230, October.
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