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Title: Multicointegration, polynomial cointegration and I(2) cointegration with structural breaks. An application to the sustainability of the US external deficit
Author: Berenguer Rico, Vanesa
Carrión i Silvestre, Josep Lluís
Keywords: Anàlisi de dades de panel
Processos estocàstics
Dèficit públic
Panel analysis
Stochastic processes
Budget deficits
Issue Date: 2007
Publisher: Universitat de Barcelona. Institut de Recerca en Economia Aplicada Regional i Pública
Series/Report no: [WP E-IR07/09]
Abstract: In this paper we model the multicointegration relation, allowing for one structural break. Since multicointegration is a particular case of polynomial or I(2) cointegration, our proposal can also be applied in these cases. The paper proposes the use of a residualbased Dickey-Fuller class of statistic that accounts for one known or unknown structural break. Finite sample performance of the proposed statistic is investigated by using Monte Carlo simulations, which reveals that the statistic shows good properties in terms of empirical size and power. We complete the study with an empirical application of the sustainability of the US external deficit. Contrary to existing evidence, the consideration of one structural break leads to conclude in favour of the sustainability of the US external deficit.
It is part of: IREA – Working Papers, 2007, IR07/09
ISSN: 2014-1254
Appears in Collections:Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))
Documents de treball / Informes (Econometria, Estadística i Economia Aplicada)

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