A threshold cointegration test with increased power. (English) Zbl 1194.91155
Summary: The low power of threshold, or asymmetric, cointegration tests is addressed. A new test is developed which combines momentum-threshold autoregression (MTAR) and local-to-unity detrending via generalised least squares (GLS). Critical values for the newly proposed GLS-MTAR threshold cointegration test are provided under alternative decisions regarding the deterministic terms employed when implementing the test. Simulation analysis of the test shows it to provide a substantial increase in power relative to the previously proposed MTAR threshold cointegration test of W. Enders and P. Siklos [Cointegration and threshold adjustment, J. Bus. Econ. Stat. 19, 166–176 (2001)].
MSC:
| 91B82 | Statistical methods; economic indices and measures |
| 62P20 | Applications of statistics to economics |
| 65C05 | Monte Carlo methods |
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