Author:
Bierens Herman J.,Martins Luis F.
Abstract
In this paper we propose a time-varying vector error correction model in which the cointegrating relationship varies smoothly over time. The Johansen setup is a special case of our model. A likelihood ratio test for time-invariant cointegration is defined and its asymptotic chi-square distribution is derived. We apply our test to the purchasing power parity hypothesis of international prices and nominal exchange rates, and we find evidence of time-varying cointegration.
Publisher
Cambridge University Press (CUP)
Subject
Economics and Econometrics,Social Sciences (miscellaneous)
Cited by
133 articles.
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