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Buffered vector error-correction models: an application to the U.S. Treasury bond rates

Buffered vector error-correction models: an application to the U.S. Treasury bond rates AbstractThis paper extends the buffered autoregressive model to the buffered vector error-correction model (VECM). Least squares estimation and a reduced-rank estimation are discussed, and the consistency of the estimators on the delay parameter and threshold parameters is derived. We also propose a supWald test for the presence of buffer-type threshold effect. Under the null hypothesis of no threshold, the supWald test statistic converges to a function of Gaussian process. A bootstrap method is proposed to obtain the p-value for the supWald test. We investigate the effectiveness of our methods by simulation studies. We apply our model to study the monthly Federal bond rates of United States. We find the evidences of buffering regimes and the asymmetric error-correction effect. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Nonlinear Dynamics & Econometrics de Gruyter

Buffered vector error-correction models: an application to the U.S. Treasury bond rates

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Publisher
de Gruyter
Copyright
© 2020 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1558-3708
eISSN
1558-3708
DOI
10.1515/snde-2019-0047
Publisher site
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Abstract

AbstractThis paper extends the buffered autoregressive model to the buffered vector error-correction model (VECM). Least squares estimation and a reduced-rank estimation are discussed, and the consistency of the estimators on the delay parameter and threshold parameters is derived. We also propose a supWald test for the presence of buffer-type threshold effect. Under the null hypothesis of no threshold, the supWald test statistic converges to a function of Gaussian process. A bootstrap method is proposed to obtain the p-value for the supWald test. We investigate the effectiveness of our methods by simulation studies. We apply our model to study the monthly Federal bond rates of United States. We find the evidences of buffering regimes and the asymmetric error-correction effect.

Journal

Studies in Nonlinear Dynamics & Econometrics – de Gruyter

Published: Dec 29, 2021

Keywords: bootstrap method; cointegration; supWald test; threshold model; vector error-correction model

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