Testing and Inference in Nonlinear Cointegrating Vector Error Correction Models

Dennis Kristensen and Anders Rahbek

No 10-25, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: In this paper, we consider a general class of vector error correction models which allow for asymmetric and non-linear error correction. We provide asymptotic results for (quasi-)maximum likelihood (QML) based estimators and tests. General hypothesis testing is considered, where testing for linearity is of particular interest as parameters of non-linear components vanish under the null. To solve the latter type of testing, we use the so-called sup tests, which here requires development of new (uniform) weak convergence results. These results are potentially useful in general for analysis of non-stationary non-linear time series models. Thus the paper provides a full asymptotic theory for estimators as well as standard and non-standard test statistics. The derived asymptotic results prove to be new compared to results found elsewhere in the literature due to the impact of the estimated cointegration relations. With respect to testing, this makes implementation of testing involved, and bootstrap versions of the tests are proposed in order to facilitate their usage. The asymptotic results regarding the QML estimators extend results in Kristensen and Rahbek (2010, Journal of Econometrics) where symmetric non-linear error correction are considered. A simulation study shows that the finite sample properties of the bootstrapped tests are satisfactory with good size and power properties for reasonable sample sizes.

JEL-codes: C30 C32 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2010-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.econ.ku.dk/english/research/publications/wp/dp_2010/1025.pdf/ (application/pdf)

Related works:
Journal Article: TESTING AND INFERENCE IN NONLINEAR COINTEGRATING VECTOR ERROR CORRECTION MODELS (2013)
Working Paper: Testing and Inference in Nonlinear Cointegrating Vector Error Correction Models (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:1025

Access Statistics for this paper

More papers in Discussion Papers from University of Copenhagen. Department of Economics Oester Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann (thho@kb.dk).