Model Specification between Parametric and Nonparametric Cointegration

Jiti Gao, Dag Tjøstheim () and Jiying Yin ()

No 18/12, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: This paper considers a general model specification between a parametric co-integrating model and a nonparametric co-integrating model in a multivariate regression model, which involves a univariate integrated time series regressor and a vector of stationary time series regressors. A new and simple test is proposed and the resulting asymptotic theory is established. The test statistic is constructed based on a natural distance function between a nonparametric estimate and a smoothed parametric counterpart. The asymptotic distribution of the test statistic under the parametric specification is proportional to that of a local-time random variable with a known distribution. In addition, the finite sample performance of the proposed test is evaluated through using both simulated and real data examples.

Keywords: Cointegration; nonparametric kernel estimation; parametric model specification; time series. (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (4)

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