Quasi-likelihood ratio tests for cointegration, cobreaking, and cotrending

Josep Lluís Carrion-i-Silvestre, Dukpa Kim

Research output: Contribution to journalArticle

Abstract

We consider a set of variables with two types of nonstationary features, stochastic trends and broken linear trends. We develop tests that can determine whether there is a linear combination of these variables under which the nonstationary features can be canceled out. The first test can determine whether stochastic trends can be eliminated and thus whether cointegration holds, regardless of whether structural breaks in linear trends are eliminated. The second test can determine whether both stochastic trends and breaks in linear trends are simultaneously removed and thus whether cointegration and cobreaking simultaneously hold. The third test can determine whether not only breaks in linear trends but also linear trends themselves are eliminated along with stochastic trends and thus whether both cointegration and cotrending hold.

Original languageEnglish
JournalEconometric Reviews
DOIs
Publication statusAccepted/In press - 2019 Jan 1

Fingerprint

Likelihood ratio test
Quasi-likelihood
Cointegration
Stochastic trend
Structural breaks

Keywords

  • Cobreaking
  • cointegration
  • cotrending
  • multiple structural breaks

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Quasi-likelihood ratio tests for cointegration, cobreaking, and cotrending. / Carrion-i-Silvestre, Josep Lluís; Kim, Dukpa.

In: Econometric Reviews, 01.01.2019.

Research output: Contribution to journalArticle

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