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Monitoring Cointegrating Polynomial Regressions: Theory and Application to the Environmental Kuznets Curves for Carbon and Sulfur Dioxide Emissions

Fabian Knorre, Martin Wagner and Maximilian Grupe
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Fabian Knorre: TU Dortmund University, Germany and Ruhr Graduate School in Economics Essen, Germany
Maximilian Grupe: TU Dortmund University, Germany

No 27, IHS Working Paper Series from Institute for Advanced Studies

Abstract: This paper develops residual-based monitoring procedures for cointegrating polynomial regressions, i. e., regression models including deterministic variables, integrated processes as well as integer powers of integrated processes as regressors. The regressors are allowed to be endogenous and the stationary errors are allowed to be serially correlated. We consider five variants of monitoring statistics and develop the results for three modified least squares estimators for the parameters of the CPRs. The simulations show that using the combination of self-normalization and a moving window leads to the best performance. We use the developed monitoring statistics to assess the structural stability of environmental Kuznets curves (EKCs) for both CO2and SO2 emissions for twelve industrialized country since the first oil price shock.

Keywords: Cointegrating Polynomial Regression; Environmental Kuznets Curve; Monitoring; Structural Change (search for similar items in EconPapers)
JEL-codes: C22 C52 Q56 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2020-12
New Economics Papers: this item is included in nep-ecm, nep-ene, nep-env, nep-ets and nep-ore
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https://irihs.ihs.ac.at/id/eprint/5586/ First version, 2020 (application/pdf)

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Journal Article: Monitoring Cointegrating Polynomial Regressions: Theory and Application to the Environmental Kuznets Curves for Carbon and Sulfur Dioxide Emissions (2021) Downloads
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