Functional-Coefficient Cointegrating Regression with Endogeneity

Han-Ying Liang, Yu Shen and Qiying Wang

A chapter in Essays in Honor of Joon Y. Park: Econometric Theory, 2023, vol. 45A, pp 157-186 from Emerald Group Publishing Limited

Abstract: Joon Y. Park is one of the pioneers in developing nonlinear cointegrating regression. Since his initial work with Phillips (Park & Phillips, 2001) in the area, the past two decades have witnessed a surge of interest in modeling nonlinear nonstationarity in macroeconomic and financial time series, including parametric, nonparametric and semiparametric specifications of such models. These developments have provided a framework of econometric estimation and inference for a wide class of nonlinear, nonstationary relationships. In honor of Joon Y. Park, this chapter contributes to this area by exploring nonparametric estimation of functional-coefficient cointegrating regression models where the structural equation errors are serially dependent and the regressor is endogenous. The self-normalized local kernel and local linear estimators are shown to be asymptotic normal and to be pivotal upon an estimation of co-variances. Our new results improve those of Cai et al. (2009) and open up inference by conventional nonparametric method to a wide class of potentially nonlinear cointegrated relations.

Keywords: Cointegration; functional-coefficient model; nonstationary time series; endogeneity; kernel estimation; local linear estimation; JEL classifications; C14; C22 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aecozz:s0731-90532023000045a005

DOI: 10.1108/S0731-90532023000045A005

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