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ADL tests for threshold cointegration

  • Jing Li

    ()

    (Department of Economics, South Dakota State University)

  • Junsoo Lee

    (Department of Economics, Finance, and Legal Studies, University of Alabama)

In this paper, we propose new tests for threshold cointegration in the autoregressive distributed lag (ADL) model. The indicators in the threshold model are based on either a nonstationary or stationary threshold variable. The cointegrating vector in this paper is not pre-specied. We adopt a supremum Wald type test to account for the so-called Davies problem. Theasymptotic null distributions of the proposed tests are free of nuisance parameters. As such, a bootstrap procedure is not required and critical values of the proposed tests are tabulated. A Monte Carlo experiment shows a good finite-sample performance of the proposed tests.

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File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/ADL_Threshold_April_2009.pdf
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Paper provided by South Dakota State University, Department of Economics in its series SDSU Working Papers in Progress with number 22009.

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Length: 35 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:sda:workpa:22009
Contact details of provider: Postal: Box 504, Scobey Hall, Brookings, SD 57007-0895
Phone: 605-688-4141
Fax: 605-688-6386
Web page: http://www.sdstate.edu/econ/
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