Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/178506
Authors: 
Schweikert, Karsten
Year of Publication: 
2018
Series/Report no.: 
Hohenheim Discussion Papers in Business, Economics and Social Sciences 07-2018
Abstract: 
In this paper, we develop new threshold cointegration tests with SETAR and MTAR adjustment allowing for the presence of structural breaks in the equilibrium equation. We propose a simple procedure to simultaneously estimate the previously unknown breakpoint and test the null hypothesis of no cointegration. Thereby, we extend the well-known residual-based cointegration test with regime shift introduced by Gregory and Hansen (1996a) to include forms of nonlinear adjustment. We derive the asymptotic distribution of the test statistics and demonstrate the finite-sample performance of the tests in a series of Monte Carlo experiments. We find a substantial decrease of power of the conventional threshold cointegration tests caused by a shift in the slope coefficient of the equilibrium equation. The proposed tests perform superior in these situations. An application to the 'rockets and feathers' hypothesis of price adjustment in the US gasoline market provides empirical support for this methodology.
Subjects: 
cointegration
threshold autoregression
structural breaks
SETAR
MTAR
asymmetric price transmission
JEL: 
C12
C32
C34
Q41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
772.46 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.