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A Note on Nonlinear Cointegration, Misspecification and Bimodality

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Abstract

We show that the asymptotic distribution of the ordinary least squares estimator in a cointegration regression may be bimodal. A simple case arises when the intercept is erroneously omitted from the estimated model or in nonlinear-in-variables models with endogenous regressors. In the latter case, a solution is to use an instrumental variable estimator. The core results in this paper also generalises to more complicated nonlinear models involving integrated time series.

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  • M.C. Medeiros & E. Mendes & Les Oxley, 2010. "A Note on Nonlinear Cointegration, Misspecification and Bimodality," Working Papers in Economics 10/01, University of Canterbury, Department of Economics and Finance.
    • Handle: RePEc:cbt:econwp:10/01
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    File URL: https://repec.canterbury.ac.nz/cbt/econwp/1001.pdf
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    1. Phillips, Peter C.B., 2006. "A Remark On Bimodality And Weak Instrumentation In Structural Equation Estimation," Econometric Theory, Cambridge University Press, vol. 22(5), pages 947-960, October.
    2. In Choi & Pentti Saikkonen, 2004. "Testing linearity in cointegrating smooth transition regressions," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 341-365, December.
    3. Park, Joon Y. & Phillips, Peter C.B., 1988. "Statistical Inference in Regressions with Integrated Processes: Part 1," Econometric Theory, Cambridge University Press, vol. 4(3), pages 468-497, December.
    4. Forchini, G., 2006. "On The Bimodality Of The Exact Distribution Of The Tsls Estimator," Econometric Theory, Cambridge University Press, vol. 22(5), pages 932-946, October.
    5. Ibragimov, Rustam & Phillips, Peter C.B., 2008. "Regression Asymptotics Using Martingale Convergence Methods," Econometric Theory, Cambridge University Press, vol. 24(4), pages 888-947, August.
    6. Hansen, Bruce E., 1992. "Heteroskedastic cointegration," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 139-158.
    7. Hillier, Grant, 2006. "Yet More On The Exact Properties Of Iv Estimators," Econometric Theory, Cambridge University Press, vol. 22(5), pages 913-931, October.
    8. Park, Joon Y & Phillips, Peter C B, 2001. "Nonlinear Regressions with Integrated Time Series," Econometrica, Econometric Society, vol. 69(1), pages 117-161, January.
    9. Xiao, Zhijie, 2009. "Functional-coefficient cointegration models," Journal of Econometrics, Elsevier, vol. 152(2), pages 81-92, October.
    10. Saikkonen, Pentti & Choi, In, 2004. "Cointegrating Smooth Transition Regressions," Econometric Theory, Cambridge University Press, vol. 20(2), pages 301-340, April.
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    Cited by:

    1. Skrobotov, Anton, 2021. "Structural breaks in cointegration models," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 63, pages 117-141.

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    More about this item

    Keywords

    Cointegration; nonlinearity; bimodality; misspecification; asymptotic theory;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • N77 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Africa; Oceania

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