Title: Testing linear cointegration against smooth transition cointegration
Authors: Martin Wagner - University of Klagenfurt (Austria) [presenting]
Oliver Stypka - Technical University Dortmund (Germany)
Abstract: Tests are developed for the null hypothesis of linear cointegration against the alternative of smooth transition cointegration. The test statistics are based on the fully modified or integrated modified OLS estimators suitably modified to Taylor approximations of smooth transition functions. This necessitates the adaptation of the estimation mentioned above approaches to models, including cross-products of integrated regressors. As transition variables, we consider integrated variables and time. For the integrated modified OLS based test, we also develop fixed-b inference. The properties of the tests are evaluated with a simulation study and compared to other test proposed by previously.