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ADL tests for threshold cointegration

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  • Jing Li

    () (Department of Economics, South Dakota State University)

  • Junsoo Lee

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

Abstract

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.

Suggested Citation

  • Jing Li & Junsoo Lee, 2009. "ADL tests for threshold cointegration," SDSU Working Papers in Progress 22009, South Dakota State University, Department of Economics.
    • Handle: RePEc:sda:workpa:22009
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    More about this item

    Keywords

    Econometric Theory; Time Series;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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