Publication: Outliers robust ECM cointegration test based on the trend components
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2000-12
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Abstract
The main goal of this paper is to analyze the behaviour of the ECM non-co integration test when
there are additive outliers in the time series under different co-breaking situations. We show that the
critical values of the usual ECM test are not robust to the presence of transitory shocks and we
suggest a procedure based on signal extraction to bypass this problem. These procedure renders
ECM tests with a left tail of distribution under the null that is robust to the presence of additive
outliers in the series. The small sample critical values and the empirical power of the test are
analyzed by Monte Carlo simulations for several low frequency filters.
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Outliers, Transitory co-breaks, Cointegration testing, Trend-component error correction models.