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Monitoring Cointegrating Polynomial Regressions: Theory and Application to the Environmental Kuznets Curves for Carbon and Sulfur Dioxide Emissions

Author

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  • Knorre, Fabian

    (TU Dortmund University, Germany and Ruhr Graduate School in Economics Essen, Germany)

  • Wagner, Martin

    (University of Klagenfurt, Austria, and Bank of Slovenia, Ljubljana, Slovenia, and Institute for Advanced Studies, Vienna, Austria)

  • Grupe, Maximilian

    (TU Dortmund University, Germany)

Abstract

This paper develops residual-based monitoring procedures for cointegrating polynomial regressions, i. e., regression models including deterministic variables, integrated processes as well as integer powers of integrated processes as regressors. The regressors are allowed to be endogenous and the stationary errors are allowed to be serially correlated. We consider five variants of monitoring statistics and develop the results for three modified least squares estimators for the parameters of the CPRs. The simulations show that using the combination of self-normalization and a moving window leads to the best performance. We use the developed monitoring statistics to assess the structural stability of environmental Kuznets curves (EKCs) for both CO2and SO2 emissions for twelve industrialized country since the first oil price shock.

Suggested Citation

  • Knorre, Fabian & Wagner, Martin & Grupe, Maximilian, 2020. "Monitoring Cointegrating Polynomial Regressions: Theory and Application to the Environmental Kuznets Curves for Carbon and Sulfur Dioxide Emissions," IHS Working Paper Series 27, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihswps:27
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    File URL: https://irihs.ihs.ac.at/id/eprint/5586/
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    More about this item

    Keywords

    Cointegrating Polynomial Regression; Environmental Kuznets Curve; Monitoring; Structural Change;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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