Functional-coefficient cointegration models

Zhijie Xiao

Journal of Econometrics, 2009, vol. 152, issue 2, pages 81-92

Abstract: This paper studies estimation and inference of functional coefficient cointegration models. The proposed model offers a more flexible structure of cointegration where the value of cointegrating coefficients may be affected by informative covariates and thus may vary over time. The model may be viewed as a stochastic cointegration model and includes the conventional cointegration model as a special case. The proposed new model provides a useful complement to the conventional fixed coefficient cointegration models. Both kernel and local polynomial estimators are investigated. Inference procedures for instability of cointegrating parameters and a test for cointegration are proposed based on the functional-coefficient estimates. Limiting distributions of the estimates and testing statistics are derived.

Keywords: Cointegration; Local; polynomial; Nonparametric; Time; varying; Functional; coefficients (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:econom:v:152:y:2009:i:2:p:81-92

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Journal of Econometrics is edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao, P. M. Robinson and A. Zellner

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