TIME-VARYING COINTEGRATION
In this paper we propose a time-varying vector error correction model in which the cointegrating relationship varies smoothly over time. The Johansen setup is a special case of our model. A likelihood ratio test for time-invariant cointegration is defined and its asymptotic chi-square distribution is derived. We apply our test to the purchasing power parity hypothesis of international prices and nominal exchange rates, and we find evidence of time-varying cointegration.
Year of publication: |
2010
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Authors: | Bierens, Herman J. ; Martins, Luis F. |
Published in: |
Econometric Theory. - Cambridge University Press. - Vol. 26.2010, 05, p. 1453-1490
|
Publisher: |
Cambridge University Press |
Description of contents: | Abstract [journals.cambridge.org] |
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