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Testing cointegration in quantile regressions with an application to the term structure of interest rates

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  • Kuriyama Nina

    (School of Economics, Mingde Main Building, Renmin University of China, 59 Zhongguancun Street, Beijing 100872, China)

Abstract
This paper proposes a cumulated sum (CUSUM) test for the null hypothesis of quantile cointegration. A fully modified quantile estimator is adopted for serial correlation and endogeneity corrections. The CUSUM statistic is composed of the partial sums of the residuals from the fully modified quantile regression. Under the null, the test statistic converges to a functional of Brownian motions. In the application to US interest rates of different maturities, evidence in favor of the expectations hypothesis for the term structure is found in the central part of the distributions of the Treasury bill rate and financial commercial paper rate, but in the tails of the constant maturity rate distribution.

Suggested Citation

  • Kuriyama Nina, 2016. "Testing cointegration in quantile regressions with an application to the term structure of interest rates," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 20(2), pages 107-121, April.
    • Handle: RePEc:bpj:sndecm:v:20:y:2016:i:2:p:107-121:n:2
    DOI: 10.1515/snde-2013-0107
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    More about this item

    Keywords

    cointegration; fully modified estimator; quantile regression; term structure;
    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
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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