ADL tests for threshold cointegration
Article first published online: 7 APR 2010
Copyright © 2010 Blackwell Publishing Ltd
Journal of Time Series Analysis
Volume 31, Issue 4, pages 241–254, July 2010
How to Cite
Li, J. and Lee, J. (2010), ADL tests for threshold cointegration. Journal of Time Series Analysis, 31: 241–254. doi: 10.1111/j.1467-9892.2010.00659.x
This paper was previously titled ‘Single-Equation ADL Tests for Threshold Cointegration’.
- Issue published online: 8 JUN 2010
- Article first published online: 7 APR 2010
- First version received April 2009 Published online in Wiley InterScience: 7 April 2010
- Threshold error-correction models;
- threshold cointegration;
- autoregressive distributed lag
In this article, we propose new tests for threshold cointegration using an autoregressive distributed lag (ADL) model. The indicators in the threshold model can adopt either a nonstationary or stationary threshold variable. The cointegrating vector is not prespecified in this article. We adopt a supremum Wald type test to account for the so-called Davies (1987, Biometrika 74,33) problem. The asymptotic null distributions of the proposed tests are free of nuisance parameters. As such, a bootstrap procedure is not required and the critical values of the proposed tests are tabulated. Monte Carlo experiments show good finite-sample performance.