Detecting cointegration relationships under nonlinear models: Monte Carlo analysis and some applications

Maki, Daiki

doi:10.1007/s00181-012-0605-1

Cited by 7 publications

(7 citation statements)

References 39 publications

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“…The theoretical solutions to non-linear cointegration and turning points determination are primarily based on the threshold vector equilibrium correction models (see for example [35]) for the their summary. The power of the particular cointegration test in finite samples depends on the class of non-linear relation, and a priori misspecification of the nonlinear model is expected to create distortions in statistical inference [36]. Even in the case that the quadratic form meets the proper specifications, some of the standard parametric tests of cointegration are not straightforwardly applicable [37].…”

Section: Literature Reviewmentioning

confidence: 99%

A Cointegration Analysis of Real GDP and CO2 Emissions in Transitional Countries

2017

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This paper analyses the relationship between real GDP and CO 2 emissions for 17 transitional economies based on a series of annual data from 1997 to 2014. The analysis was conducted using Dynamic Ordinary Least Squares (OLS) (DOLS) and Fully Modified OLS (FMOLS) approaches. The results clearly suggest the existence of a statistically significant long-run cointegrating relationship between CO 2 emissions and real GDP. A 1% change in GDP leads to around a 0.35% change of CO 2 emission on average for the considered group of countries. Close values of long-run coefficients for all estimations confirm the robustness of the estimated results. The authors state that transitional economies need to follow global policy incentives, and try to implement new mechanisms and instruments for the purpose of reducing CO 2 emissions, such as environmental taxes, emissions-trading schemes, and carbon capture and storage, if they want to achieve future CO 2 emission reductions, while attaining economic growth.

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Section: Literature Reviewmentioning

confidence: 99%

A Cointegration Analysis of Real GDP and CO2 Emissions in Transitional Countries

2017

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“…Moreover, Granger causality tests confirmed that causality runs from stock prices to exchange rates in six of the countries. İlkhan et al (2022) investigated the relationship between gold prices, US dollar and BIST 100 index in Turkey by using Maki (2012) cointegration and ARDL bound tests. According to the result of this study there was a long-term relationship between USD and BIST100 variables, while there was cointegration between gold prices and BIST100.…”

Section: Literaturementioning

confidence: 99%

“…Nonlinear models have recently attracted much attention, whereas there is no consensus on suggesting a unique approach for specifying econometric models. Maki (2012) demonstrated that the cointegration test with threshold adjustment usually performs better than other nonlinear cointegration relationships. We decided to use the threshold cointegration test in light of this finding.…”

Section: Introductionmentioning

confidence: 99%

Linkages Between Stock Price and Selected Economic Variables in Turkey: Evidence From Cointegration in Star

RAHMANI¹,

Güri̇ş

2022

Erciyes Üniversitesi İktisadi Ve İdari Bilimler Fakültesi Dergisi

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After globalization, all the markets in the world are known as a competitive field and accordingly the economic interactions emerge more strongly. Similarly, Turkey stock market can be affected by both national and international economic variables. This study analyses nonlinear cointegration between stock price and some selected economic variables in Turkey for the period January 2000 to June 2019. It particularly compares the result of KSS (2006) and Maki (2010) cointegration tests. The results of these two tests are different because of using different processes. Our findings support the presence of long run relationship with STAR adjustment between stock price and other economic variables. Findings also shows that the adjustment of equilibrium between stock price, gold price and exchange rate take much time while the adjustment of equilibrium between stock price, interest rate and inflation don’t take much time. Moreover, there are the long run causality between stock price and other variables except interest rate. The findings of this study can be helpful for Turkish portfolio management, as well as the financial risk management

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“…It is well-known that conventional residual-based cointegration tests perform poorly when a cointegration relationship has structural breaks (see, for example, Gregory et al (1996)). Maki (2012) found that the power property of threshold cointegration tests is more robust to structural breaks than, for example, the Engle-Granger cointegration tests assuming linear adjustment. Nevertheless, the power of all residual-based cointegration tests is impaired if the tests do not model the structural breaks explicitly.…”

Section: Introductionmentioning

confidence: 99%

Testing for cointegration with threshold adjustment in the presence of structural breaks

Schweikert

2019

Studies in Nonlinear Dynamics &Amp; Econometrics

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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 cointegration. Thereby, we extend the well-known residual-based cointegration test with regime shift introduced by (Gregory, A. W., and B. E. Hansen. 1996a. “Residual-based Tests for Cointegration in Models with Regime Shifts.” Journal of Econometrics 70: 99–126) to include forms of nonlinear adjustment. We derive the asymptotic distribution of the test statistics and demonstrate the finite-sample performance of the tests in a series of Monte Carlo experiments. We find a substantial decrease of power of the conventional threshold cointegration tests caused by a shift in the slope coefficient of the equilibrium equation. The proposed tests perform superior in these situations. An application to the “rockets and feathers” hypothesis of price adjustment in the US gasoline market provides empirical support for this methodology.

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Detecting cointegration relationships under nonlinear models: Monte Carlo analysis and some applications

Cited by 7 publications

References 39 publications

A Cointegration Analysis of Real GDP and CO2 Emissions in Transitional Countries

A Cointegration Analysis of Real GDP and CO2 Emissions in Transitional Countries

Linkages Between Stock Price and Selected Economic Variables in Turkey: Evidence From Cointegration in Star

Testing for cointegration with threshold adjustment in the presence of structural breaks

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