Testing the Null of Cointegration with Structural Breaks*

Josep Lluís Carrion‐i‐Silvestre and Andreu Sansó
Authors registered in the RePEc Author Service: Josep Lluís Carrion-i-Silvestre

Oxford Bulletin of Economics and Statistics, 2006, vol. 68, issue 5, 623-646

Abstract: We propose a Lagrange Multiplier‐type statistic to test the null hypothesis of cointegration allowing for the possibility of a structural break, in both the deterministic and the cointegration vectors. Our proposal focuses on the presence of endogenous regressors. The test complements the usual non‐cointegration tests so as to obtain stronger evidence of cointegration. We consider the cases of known and unknown dates of the break. In the latter case, we show that minimizing the Sum of Squared Residuals results in a super‐consistent estimator of the break fraction. Finally, the behaviour of the tests is studied through Monte Carlo experiments.

Date: 2006
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Citations: View citations in EconPapers (87)

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https://doi.org/10.1111/j.1468-0084.2006.00180.x

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Working Paper: Testing the Null of Cointegration with Structural Breaks (2005)
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