Premium
PRACTITIONERS CORNER: Tests for Cointegration in Models with Regime and Trend Shifts
Author(s) -
Gregory Allan W.,
Hansen Bruce E.
Publication year - 1996
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/j.1468-0084.1996.mp58003008.x
Subject(s) - cointegration , regime shift , residual , econometrics , paradigm shift , structural break , economics , mathematics , physics , quantum mechanics , ecology , algorithm , ecosystem , biology
Recently Gregory and Hansen (1996) proposed a number of residual‐based tests for cointegration in models with the possibility of a structural break. They considered three models: (i) level shift; (ii) level shift with trend; and (iii) regime shift (both level shift and slope coefficients can change). We introduce a more general model that permits a trend shift as well as a regime shift and we provide the critical values appropriate for testing this hypothesis.