Nonlinear Cointegration, Misspecification and Bimodality

Marcelo Medeiros (), Eduardo Mendes and Les Oxley
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Eduardo Mendes: DEPARTMENT OF STATISTICS, NORTHWESTERN UNIVERSITY,

No 577, Textos para discussão from Department of Economics PUC-Rio (Brazil)

Abstract: We show that the asymptotic distribution of the ordinary least squares estimator in a cointegration regression may be bimodal. A simple case arises when the intercept is erroneously omitted from the estimated model or in nonlinear-in-variables models with endogenous regressors. In the latter case, a solution is to use an instrumental variable estimator. The core results in this paper also generalises to more complicated nonlinear models involving integrated time series.

Keywords: Cointegration; nonlinearity; bimodality; misspecification; instrumental variables; asymptotic theory. (search for similar items in EconPapers)
Pages: 24p
Date: 2010-10
New Economics Papers: this item is included in nep-ecm and nep-ets
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