This paper provides some test cases, called circuits, for the evaluation of Gaussian likelihood maximization algorithms of the cointegrated vector autoregressive model. Both I(1) and I(2) models are considered. The performance of algorithms is compared first in terms of effectiveness, defined as...

We characterize the restrictions imposed by the minimal I(2)-to-I(1) transformation that underlies much applied work, e.g. on money demand relationships or open-economy pricing relationships. The relationship between the parameters of the original I(2) vector autoregression, including the...

This paper investigates the finite-sample properties of the smooth transition-based cointegration test proposed by Kapetanios et al. (2006) when the data generating process under the alternative hypothesis is a globally stationary second order LSTR model. The provided procedure describes an...

This paper investigates the properties of tests for asymmetric long-run adjustment which are often applied in empirical studies on asymmetric price transmissions. We show that substantial size distortions are caused by preconditioning the test on finding sufficient evidence for cointegration in...

This paper demonstrates that unit root tests can suffer from inflated Type I error rates when data are cointegrated. Results from Monte Carlo simulations show that three commonly used unit root tests - the ADF, Phillips-Perron, and DF-GLS tests - frequently overreject the true null of a unit...

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...

In this paper I analyse the effects of ignoring level shifts in the data generating process (DGP) on systems cointegration tests that do not accommodate level shifts. I consider two groups of Likelihood Ratio tests based on procedures suggested by Johansen (1988, 1995) and Saikkonen & Lütkepohl...

The problem of detecting unit roots in univariate and multivariate time series data is treated as a problem of multiple decisions instead of a testing problem, as is otherwise common in the econometric and statistical literature. Four examples for such multiple decision designs are considered:...

We assess market integration and price transmission of perishable agricultural produce in Sub-Saharan Africa by studying Ghanaian tomato markets which are characterized by pronounced seasonality in production and trade flows. We analyse the tomato markets of Ghana by simultaneously regarding its...