Testing the Null of Cointegration with Structural Breaks

Josep Carrion-i-Silvestre and Andreu Sansó

No 10, DEA Working Papers from Universitat de les Illes Balears, Departament d'Economía Aplicada

Abstract: In this paper we propose an LM-Type statistic to test the null hypothesis of cointegration allowing for the possibility of a structural break, in both the deterministic and the cointegration vector. Our proposal focuses on the presence of endogenous regressors and analyses which estimation method provides better results. The test has been designed to be used as a complement to the usual non-cointegration tests in order to obtain stronger evidence of cointegration. We consider the cases of known and unknown break date. In the latter case, we show that minimizing the SSR results in a super-consistent estimator of the break fraction. Finally, the behaviour of the tests is studied through Monte Carlo experiments.

Keywords: cointegration; strcutural breaks; KPSS test. (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Date: 2005-11
New Economics Papers: this item is included in nep-ets
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Citations: View citations in EconPapers (9)

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Journal Article: Testing the Null of Cointegration with Structural Breaks* (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ubi:deawps:10

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