 Testing for the Null Hypothesis of Cointegration with a Structural BreakYoichi Arai and Eiji Kurozumi () Econometric Reviews, 2007, vol. 26, issue 6, 705-739 Abstract: In this paper we propose residual-based tests for the null hypothesis of cointegration with a structural break against the alternative of no cointegration. The Lagrange Multiplier (LM) test is proposed and its limiting distribution is obtained for the case in which the timing of a structural break is known. Then the test statistic is extended to deal with a structural break of unknown timing. The test statistic, a plug-in version of the test statistic for known timing, replaces the true break point by the estimated one. We show the limiting properties of the test statistic under the null as well as the alternative. Critical values are calculated for the tests by simulation methods. Finite-sample simulations show that the empirical size of the test is close to the nominal one unless the regression error is very persistent and that the test rejects the null when no cointegrating relationship with a structural break is present. We provide empirical examples based on the present-value model, the term structure model, and the money-output relationship model. Keywords: Cointegration; Integrated time series; No cointegration; Structural break (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:emetrv:v:26:y:2007:i:6:p:705-739 Ordering information: This journal article can be ordered from DOI: 10.1080/07474930701653776 Access Statistics for this article Econometric Reviews is currently edited by Dr. Essie Maasoumi More articles in Econometric Reviews from Taylor & Francis Journals |
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