Document type
Working paperPublication date
Publication license
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/63551
Multicointegration, polynomial cointegration and I(2) cointegration with structural breaks. An application to the sustainability of the US external deficit
Journal Title
Director/Tutor
Journal ISSN
Volume Title
Related resource
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.
Subject (English)
Citation
Citation
BERENGUER RICO, Vanesa and CARRIÓN I SILVESTRE, Josep Lluís. Multicointegration, polynomial cointegration and I(2) cointegration with structural breaks. An application to the sustainability of the US external deficit. IREA – Working Papers. 2007. Vol. IR07/09. ISSN 2014-1254. [consulted: 6 of June of 2026]. Available at: https://hdl.handle.net/2445/63551