Time-varying cointegration, identification, and cointegration spaces

Martins, LF and Gabriel, VJ (2013) Time-varying cointegration, identification, and cointegration spaces Studies in Nonlinear Dynamics and Econometrics, 17 (2). pp. 199-209.

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Abstract

We derive the conditions under which time-varying cointegration leads to cointegration spaces that may be time-invariant or, in contrast, time-varying. The model of interest is a vector error correction model with arbitrary time-varying cointegration parameters. We clarify the role of identification and normalization restrictions and show that structural breaks in error-correction models may actually correspond to stable long-run economic relationships, as opposed to a single-equation setup, in which an identification restriction is imposed. Moreover, we show that, in a time-varying cointegrating relationship with a given number of variables and cointegration rank, there is a minimum number of orthogonal Fourier functions that most likely guarantees time-varying cointegrating spaces.

Item Type:	Article
Divisions :	Surrey research (other units)
Authors :	Martins, LF and Gabriel, VJ
Date :	April 2013
DOI :	10.1515/snde-2012-0022
Depositing User :	Symplectic Elements
Date Deposited :	28 Mar 2017 13:26
Last Modified :	24 Jan 2020 12:17
URI:	http://epubs.surrey.ac.uk/id/eprint/804846

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