Separate cointegration in a VAR system subject to structural breaks
Economics Letters, 2019, vol. 179, issue C, 19-23
This note demonstrates that the analysis of separate cointegration can be facilitated by properly allowing for regime shifts in the underlying data generation process. A vector autoregressive (VAR) model is reformulated in such a way that it is subject to deterministic breaks and also contains the structure of separate cointegration. A comparative empirical study shows the advantage of the proposed VAR model over the standard model in revealing the structure.
Keywords: Separate cointegration; Vector autoregressive (VAR) models; Deterministic breaks (search for similar items in EconPapers)
JEL-codes: C3 C12 C22 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:179:y:2019:i:c:p:19-23
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