Monte Carlo tests of cointegration with structural breaks

Ralf Östermark (Åbo Akademi University, Finland)
Rune Höglund (Åbo Akademi University, Finland)

Kybernetes

ISSN: 0368-492X

Publication date: 1 December 2000

Abstract

The power and size of five cointegration tests, the ADF‐, Zˆα‐, ECM‐, SW‐, and JJ‐statistics, are evaluated in some large‐scale Monte Carlo simulations, when the underlying system is subjected to regime shifts. Following the suggestion by Gregory and Hansen, selects the minimum value for the shift‐corrected statistics evaluated over a set of tentative break points for the regime shifts. The performance of these statistics is compared to the corresponding ordinary statistics in conditions of regime shifts. The results show that no test uniformly outperforms the others in terms of power in the parameter space we have used.

Keywords

Citation

Östermark, R. and Höglund, R. (2000), "Monte Carlo tests of cointegration with structural breaks", Kybernetes, Vol. 29 No. 9/10, pp. 1284-1297. https://doi.org/10.1108/03684920010346347

Download as .RIS

Publisher

:

MCB UP Ltd

Copyright © 2000, MCB UP Limited

Please note you might not have access to this content

You may be able to access this content by login via Shibboleth, Open Athens or with your Emerald account.
If you would like to contact us about accessing this content, click the button and fill out the form.
To rent this content from Deepdyve, please click the button.