Likelihood-Based Cointegration Analysis in Panels of Vector Error-Correction Models

A Comparison of Threshold Cointegration and Markov-Switching Vector Error Correction Models in Price Transmission Analysis

Bootstrapping the likelihood ratio cointegration test in error correction models with unknown lag order

The finite-sample size and power properties of bootstrapped likelihood ratio systems cointegration tests are investigated via Monte Carlo simulations when the true lag order of the data generating process is unknown. Recursive bootstrap schemes are employed which differ in the way the lag order is chosen. The order is estimated by minimizing different information criteria and by combining the c...

Cointegration and Error Correction

1 The Background Elementary courses in statistics introduce at an early stage the key assumption of “random sampling”. In more technical language, the data set is assumed to be identically and independently distributed (i.i.d.). In this framework a range of simple and elegant results can be derived, for example, that the variance of the mean of n observations is 1/n times the variance of the ob...

Testing for Cointegration in Nonlinear STAR Error Correction Models

In this paper we propose a new testing procedure to detect the presence of a cointegrating relationship that follows a globally stationary smooth transition autoregressive (STAR) process. We start from a general VAR model, embed the STAR error correction mechanism (ECM) and then derive the generalised nonlinear STAR error correction model. We provide two operational versions of the tests. First...

Not Just for Cointegration: Error Correction Models with Stationary Data

The error correction model is generally thought to be isomorphic to integrated data and the modeling of cointegrated processes, and as such, is considered inappropriate for stationary data. Given that many political time series are not integrated, analysts are unable to take advantages of the error correction model’s ability to capture both long and short-term dynamics in a single statistical m...