Cointegration with Structural Breaks: An Application to the Feldstein-Horioka Puzzle

Kejriwal, Mohitosh

doi:10.2202/1558-3708.1467

Cited by 46 publications

(119 citation statements)

References 41 publications

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“…I estimate the number and positions of breakpoints using tests developed by Perron (1998, 2003) for a stationary context and extended by Kejriwal andPerron (2008b, 2010) can be found in Kejriwal (2008) and Kejriwal and Perron (2010), the latter of which has critical values. 22 .…”

Section: Detecting Structural Breaksmentioning

confidence: 99%

“…The number of breaks corresponds to the value k at which the sequential test, F * T (k + 1|k), is no longer rejected at the 1% level. 24 In most cases, the number of breakpoints selected corresponds to the minimum of either the BIC or LWZ information criterion 25 mentioned by Perron (1998, 2003) and Kejriwal (2008). 26 Breakpoint test statistics are available in Tables 3, 4, and 5.…”

Section: Estimationmentioning

confidence: 99%

“…In this case, I use the Liu et al (1997) (LWZ) criterion, the minimum of which corresponds to a sharp decrease in the F * T (k + 1|k) test that would clearly indicate a break were ≥ 0.15. 25 See Kejriwal (2008) for formulas. 26 Breakpoint estimation is done using the R package strucchange, modified slightly to meet my needs.…”

Section: Estimationmentioning

confidence: 99%

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Global LNG Pricing Terms and Revisions: An Empirical Analysis

Agerton¹

2017

The Energy Journal

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Asian long-term contracts for liquefied natural gas (LNG) are generally thought to index LNG prices to oil prices. This should mean that LNG and oil prices are cointegrated. However, statistical evidence for cointegration using Japanese data is not strong. To resolve this puzzle, I examine 16 Japanese, South Korean, Taiwanese, and Spanish LNG import price series and allow for multiple, unknown structural breaks in the relationship to oil prices. This resolves the puzzle, and I provide estimates for the timing of breaks and the underlying average pricing terms. I relate these to count, volume, and duration data on long-term contracts and discuss how to interpret econometric estimates in light of contract data. This paper complements existing work on global gas market integration, which largely ignores how discrete changes in oil-indexed long-term contracts will affect empirical relationships.

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Section: Detecting Structural Breaksmentioning

confidence: 99%

Section: Estimationmentioning

confidence: 99%

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Global LNG Pricing Terms and Revisions: An Empirical Analysis

Agerton¹

2017

The Energy Journal

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“…To determine the timing of breaks Perron (1998, 2003) Yet, the Kejriwal and Perron (2010) stability test may reject the null of coefficient stability when the regression is a spurious one, i.e., not cointegrated; hence, the Kejriwal (2008) cointegration test with multiple breaks is used to confirm the presence of cointegration, i.e., reject the possibility of a spurious relationship. That test considers the relation…”

Section: Optimal Timing Of Breaks and Cointegration Tests And Estimatmentioning

confidence: 99%

“…Table 1 Again, to determine the number and timing of breaks, we consider two information/decision criteria, i.e., the sequential method of Kejriwal and Perron (2010) and the LWZ criterion. If the sequential method did not determine a break, we went with the number of breaks determined by the LWZ (as in Kejriwal 2008). If the two criteria suggest different, nonzero number of breaks, we consider both possibilities (a case that only occurred for Poland and UK).…”

Section: Optimal Timing Of Breaks and Cointegration Tests And Estimatmentioning

confidence: 99%

Revisiting sulfur Kuznets curves with endogenous breaks modeling: Substantial evidence of inverted-Us/Vs for individual OECD countries

Liddle

Messinis

2015

Economic Modelling

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This paper tests for a sulfur Kuznets curve by examining the sulfur emissions per capita-GDP per capita relationship individually, for 25 OECD countries over 1950-2005 using a reduced-form, linear model that allows for multiple endogenously determined breaks. This approach addresses several important econometric and modeling issues, e.g., (i) it is highly flexible and can approximate complicated nonlinear relationships without presuming a priori any particular relationship; (ii) it avoids the nonlinear transformations of potentially nonstationary income. The predominant post-1950 income-sulfur emissions relationship-the case for 24 of the 25 countries studied-was either (i) inverted-Vs, where the emissions-income relationship became negative, or (ii) decoupling, where income no longer affected emissions in a long-run, statistically significant way. Seventeen of the 21 transitional breaks uncovered occurred over 1965-1978; hence, in concert with previous work, we conclude that shared timing among countries is important in income-environment transitions.

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Modelling Time-Varying Parameters in Panel Data State-Space Frameworks: An Application to the Feldstein–Horioka Puzzle

2019

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In this paper, we develop a State-Space framework for modeling panel time series data. Our research extends the simple canonical model generally employed in the literature, into a panel-data time-varying parameters framework, combining both fixed (either common and country-specific) and varying components. Under some specific circumstances, this setting can be understood as a mean-reverting panel time-series model, where the mean fixed parameter can, at the same time, include a deterministic trend. Regarding the transition equation, our structure allows for the estimation of different autoregressive alternatives, and include control instruments, whose coefficients can be setup either common or idiosyncratic. This is particularly useful to detect asymmetries among individuals (countries) to common shocks. We develop a GAUSS code that allows for the introduction of restrictions regarding the variances of both the transition and measurement equations. Finally, we use this empirical framework to test for the Feldstein-Horioka puzzle in a 17-country panel. The results show its usefulness to solving complexities in macroeconomic empirical research.

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Cointegration with Structural Breaks: An Application to the Feldstein-Horioka Puzzle

Cited by 46 publications

References 41 publications

Global LNG Pricing Terms and Revisions: An Empirical Analysis

Global LNG Pricing Terms and Revisions: An Empirical Analysis

Revisiting sulfur Kuznets curves with endogenous breaks modeling: Substantial evidence of inverted-Us/Vs for individual OECD countries

Modelling Time-Varying Parameters in Panel Data State-Space Frameworks: An Application to the Feldstein–Horioka Puzzle

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