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partialCI: An R package for the analysis of partially cointegrated time series

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  • Clegg, Matthew
  • Krauss, Christopher
  • Rende, Jonas

Abstract

Partial cointegration is a weakening of cointegration, allowing for the residual series to contain a mean-reverting and a random walk component. Analytically, the residual series is described by a partially autoregressive process. The partialCI package provides estimation, testing, and simulation routines for PCI models in state space. We illustrate the functionality with two examples: A financial application in the context of pairs trading and a macroeconomic application, i.e., the relationship between GDP and consumption. For both examples, we show that the variables are not cointegated in the classic sense, but can be modeled with partial cointegration.

Suggested Citation

  • Clegg, Matthew & Krauss, Christopher & Rende, Jonas, 2017. "partialCI: An R package for the analysis of partially cointegrated time series," FAU Discussion Papers in Economics 05/2017, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
  • Handle: RePEc:zbw:iwqwdp:052017
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    References listed on IDEAS

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    Keywords

    R software; cointegration; partial cointegration; pairs trading; permanent components; transient components;

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