Testing for Smooth Transition Nonlinearity in Adjustments of Cointegrating Systems

This paper studies testing for the presence of smooth transition nonlinearity in adjustment parameters of the vector error correction model. We specify the generalized model with multiple cointegrating vectors and di§erent transition functions across equations. Given that the nonlinear model is highly complex, this paper proposes an optimal LM test based only on estimation of the linear model. The null asymptotic distribution is derived using empirical process theory and since the transition parameters of the model cannot be identiÖed under the null hypothesis bootstrap procedures are used to approximate the limit. Monte Carlo simulations indicate a good performance of the test.


Issue Date:
Oct 10 2008
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/269887
Language:
English
Total Pages:
39
JEL Codes:
C12; C32




 Record created 2018-03-26, last modified 2020-10-28

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)