Quasi-likelihood ratio tests for cointegration, cobreaking, and cotrending
Josep Carrion-i-Silvestre () and
Dukpa Kim ()
Econometric Reviews, 2019, vol. 38, issue 8, 881-898
We consider a set of variables with two types of nonstationary features, stochastic trends and broken linear trends. We develop tests that can determine whether there is a linear combination of these variables under which the nonstationary features can be canceled out. The first test can determine whether stochastic trends can be eliminated and thus whether cointegration holds, regardless of whether structural breaks in linear trends are eliminated. The second test can determine whether both stochastic trends and breaks in linear trends are simultaneously removed and thus whether cointegration and cobreaking simultaneously hold. The third test can determine whether not only breaks in linear trends but also linear trends themselves are eliminated along with stochastic trends and thus whether both cointegration and cotrending hold.
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Persistent link: https://EconPapers.repec.org/RePEc:taf:emetrv:v:38:y:2019:i:8:p:881-898
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