The Fourier approximation and testing for the null of cointegration

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• 作者：Ching-Chuan Tsong ; Cheng-Feng Lee ; Li-Ju Tsai ; Te-Chung Hu
• 关键词：Cointegration ; Fourier approximation ; Structural change ; Fiscal sustainability
• 刊名：Empirical Economics
• 出版年：2016
• 出版时间：November 2016
• 年：2016
• 卷：51
• 期：3
• 页码：1085-1113
• 全文大小：693 KB
• 刊物主题：Econometrics; Statistics for Business/Economics/Mathematical Finance/Insurance; Economic Theory;
• 出版者：Springer Berlin Heidelberg
• ISSN：1435-8921
• 卷排序：51

文摘

In this paper, we propose a test to investigate the null of cointegration allowing for structural breaks of unknown form in deterministic trend by using the Fourier form. The test is developed on the basis of the fact that structural breaks of unknown form can be approximated with a low-frequency Fourier component. As a result, the statistic is able to test cointegration without estimating specific break dates. The asymptotic distribution of the test is derived, and the asymptotic critical values are tabulated. Simulation experiments show that the test can deliver robust type I error for various breaks commonly seen in economic analysis and have good power, even in small sample sizes encountered in empirical studies. Our test is applied to analyze the issue of fiscal sustainability in the nine OECD countries with a high debt-to-GDP ratio.