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Bootstrapping cointegration tests under structural co-breaks: A robust extended ECM test

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  • Miguel Arranz
  • Alvaro Escribano

Abstract

The aim of the paper is the analysis of ECM bootstrap cointegration tests under structural breaks. Classical ECM tests depend on sorne nuisance parameters, which is an undesirable feature for empirical applications. This problem is overcome by using the bootstrap ECM test, which shows good size and power properties when there are no breaks. In this paper we study the small sample properties of alternative bootstrap ECM tests under different cobreaking situations. ECM test statistics are made robust to partial cobreaking by using extended error correction models or by imposing a common factor restriction.
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  • Miguel Arranz & Alvaro Escribano, 2006. "Bootstrapping cointegration tests under structural co-breaks: A robust extended ECM test," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 15(1), pages 179-208, June.
    • Handle: RePEc:spr:testjl:v:15:y:2006:i:1:p:179-208
    DOI: 10.1007/BF02595424
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    References listed on IDEAS

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