Partial Cointegrated Vector Autoregressive Models with Structural Breaks in Deterministic Terms
by
Takamitsu Kurita 1,†
and Bent Nielsen 2,*,†
Takamitsu Kurita 1,† and Bent Nielsen 2,*,†
1
Faculty of Economics, Fukuoka University, 8-19-1, Nanakuma, Jonan-ku, Fukuoka 814-0180, Japan
2
Department of Economics and Program for Economic Modelling, University of Oxford & Nuffield College, Oxford OX1 1NF, UK
*
Author to whom correspondence should be addressed.
†
These authors contributed equally to this work.
Econometrics 2019, 7(4), 42; https://doi.org/10.3390/econometrics7040042
Received: 10 December 2018 / Revised: 28 September 2019 / Accepted: 30 September 2019 / Published: 6 October 2019
(This article belongs to the Special Issue Celebrated Econometricians: Katarina Juselius and Søren Johansen)
This paper proposes a class of partial cointegrated models allowing for structural breaks in the deterministic terms. Moving-average representations of the models are given. It is then shown that, under the assumption of martingale difference innovations, the limit distributions of partial quasi-likelihood ratio tests for cointegrating rank have a close connection to those for standard full models. This connection facilitates a response surface analysis that is required to extract critical information about moments from large-scale simulation studies. An empirical illustration of the proposed methodology is also provided.
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Keywords:
partial cointegrated vector autoregressive models; structural breaks; deterministic terms; weak exogeneity; cointegrating rank; response surface
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Kurita, T.; Nielsen, B. Partial Cointegrated Vector Autoregressive Models with Structural Breaks in Deterministic Terms. Econometrics 2019, 7, 42.
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