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ADL tests for threshold cointegration

Jing Li () and Junsoo Lee ()

No 22009, SDSU Working Papers in Progress from South Dakota State University, Department of Economics

Abstract: In this paper, we propose new tests for threshold cointegration in the autoregressive distributed lag (ADL) model. The indicators in the threshold model are based on either a nonstationary or stationary threshold variable. The cointegrating vector in this paper is not pre-specied. We adopt a supremum Wald type test to account for the so-called Davies problem. Theasymptotic null distributions of the proposed tests are free of nuisance parameters. As such, a bootstrap procedure is not required and critical values of the proposed tests are tabulated. A Monte Carlo experiment shows a good finite-sample performance of the proposed tests.

Keywords: Econometric Theory; Time Series (search for similar items in EconPapers)
JEL-codes: C12 C15 C32 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2009-04
New Economics Papers: this item is included in nep-ecm and nep-ets
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Journal Article: ADL tests for threshold cointegration (2010) Downloads
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