Tests for Cointegration Breakdown Over a Short Time Period

Andrews, Donald W.K.; Kim, Jae‐Young

doi:10.1198/073500106000000297

Cited by 44 publications

(95 citation statements)

References 35 publications

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“…The null hypothesis that cointegration prevails from 1951 to 2010 is, thus, tested against several alternative hypotheses of cointegration breakdowns. The p-values for P 2 P a ; P b ; P c f g and R 2 R a ; R b ; R c f g tests are computed using the parametric subsampling method suggested by Andrews and Kim (2006). The results suggest that both P c and R c statistics reject the null hypothesis of cointegration against the alternative hypothesis of cointegration breakdown during 1991-2010, though the evidence is mixed across OLS and FMOLS estimates.…”

Section: T Singhmentioning

confidence: 92%

“…Of these, P c has somewhat better size properties as compared to R c , while R c has power that is less variable across different distributions as compared to P c . On balance, Andrews and Kim (2006) prefer P c because of its somewhat better size properties as compared to R c .…”

Section: T Singhmentioning

confidence: 96%

“…; u m f gor (iv) some combination of these shifts. Andrews and Kim (2006) provide P 2 P a ; P b ; P c f g and R 2 R a ; R b ; R c f g tests to test H 0 against H 1 . In P 2 P a ; P b ; P c f g tests, prediction errors are constructed asû t ¼ y t À x 0 tβ 1ÀT , t 2 T þ 1; .…”

Section: T Singhmentioning

confidence: 99%

“…. ; T þ m f g , are linear combinations of I(1) random, stationary random and deterministic variables, such as a constant and a linear time trend (Andrews and Kim, 2006;Carstensen, 2006). The errors for first T periods, u t : t 2 1; .…”

Section: T Singhmentioning

confidence: 99%

“…The standard model stability tests and estimators seem inadequate to take an efficient account of structural breaks that may occur over the short periods and at the end of the sample. Andrews and Kim (2006) develop the new end-of-sample cointegration breakdown tests that are efficient in the presence of short-period breaks in the cointegrating vector.…”

Section: T Singhmentioning

confidence: 99%

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Sustainability of current account deficits in India: an intertemporal perspective

Singh

2015

Applied Economics

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This study examines the sustainability of current account deficits (CADs) and the validity of intertemporal budget constraint (IBC) in India. The long-run model is estimated on annual data for the period 1950-1951 to 2009-2010. The optimal single-equation and maximum-likelihood (ML) system estimates of the model provide a consistent support for the longrun relationship between imports and exports. The OLSGH estimates provide no support and that ML system estimates a consistent support for cointegration in both the models estimated with one and two structural breaks in level. The new cointegration breakdown tests generally suggest that the cointegration prevails from 1951 to 2010. The evidence supporting the cointegration between imports and exports overwhelms the evidence providing a mixed or no support for cointegration. The estimates of slope parameter above zero and the dominant support for cointegration between imports and exports vindicate the validity of IBC and the sustainability of CADs. The short-term management strategies need to be accompanied by long-term improvements in productivity to reduce inflation, lever up the competitiveness of exports and ensure the sustainability of the external value of domestic currency.

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Section: T Singhmentioning

confidence: 92%

Section: T Singhmentioning

confidence: 96%

Section: T Singhmentioning

confidence: 99%

Section: T Singhmentioning

confidence: 99%

Section: T Singhmentioning

confidence: 99%

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Sustainability of current account deficits in India: an intertemporal perspective

Singh

2015

Applied Economics

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Real‐time detection of regimes of predictability in the US equity premium

Harvey

Leybourne

Sollis

et al. 2020

J of Applied Econometrics

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Summary We propose new real‐time monitoring procedures for the emergence of end‐of‐sample predictive regimes using sequential implementations of standard (heteroskedasticity‐robust) regression t‐statistics for predictability applied over relatively short time periods. The procedures we develop can also be used for detecting historical regimes of temporary predictability. Our proposed methods are robust to both the degree of persistence and endogeneity of the regressors in the predictive regression and to certain forms of heteroskedasticity in the shocks. We discuss how the monitoring procedures can be designed such that their false positive rate can be set by the practitioner at the start of the monitoring period using detection rules based on information obtained from the data in a training period. We use these new monitoring procedures to investigate the presence of regime changes in the predictability of the US equity premium at the 1‐month horizon by traditional macroeconomic and financial variables, and by binary technical analysis indicators. Our results suggest that the 1‐month‐ahead equity premium has temporarily been predictable, displaying so‐called “pockets of predictability,” and that these episodes of predictability could have been detected in real time by practitioners using our proposed methodology.

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