Cointegration and Threshold Adjustment
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TL;DR: In this article, an extension to the Engle-granger testing strategy by permitting asymmetry in the adjustment toward equilibrium in two different ways is proposed. But the test has good power and size properties over the original test when there are asymmetric departures from equilibrium.
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Abstract: Cointegration among interest rates for instruments with different maturities has been widely tested with mixed results. This paper provides an extension to the Engle-granger testing strategy by permitting asymmetry in the adjustment toward equilibrium in two different ways. We demonstrate that our test has good power and size properties over the Engle-Granger test when there are asymmetric departures from equilibrium. Empirical tests using US yields confirm the asymmetric nature of error correction among interest rates of different maturities.
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References
Co-integration and Error Correction: Representation, Estimation and Testing
TL;DR: The relationship between co-integration and error correction models, first suggested in Granger (1981), is here extended and used to develop estimation procedures, tests, and empirical examples.
Trends and random walks in macroeconmic time series: Some evidence and implications
TL;DR: In this paper, the authors investigate whether macroeconomic time series are better characterized as stationary fluctuations around a deterministic trend or as non-stationary processes that have no tendency to return to the deterministic path, and conclude that macroeconomic models that focus on monetary disturbances as a source of purely transitory fluctuations may not be successful in explaining a large fraction of output variation.
5.3K
Cointegration and error correction: representation
Robert F. Engle,Granger C.W.J. +1 more
- 01 Jan 1987
4.1K
Testing for Common Trends
James H. Stock,Mark W. Watson +1 more
TL;DR: In this article, two tests for the number of common stochastic trends (i.e., for the order of cointegration) in a multiple time series with and without drift are developed.
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Threshold models in non-linear time series analysis
Howell Tong
- 01 Jan 1983
TL;DR: This chapter discusses SETAR Modelling, Threshold Models and Discrete-Time Non-Linear Vibrations, and some Advantages and Some Limitations of Arma Models.
1.6K