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- Publisher
- de Gruyter
- Copyright
- Copyright © 2013 by the
- ISSN
- 1081-1826
- eISSN
- 1558-3708
- DOI
- 10.1515/snde-2012-0022
- Publisher site
- See Article on Publisher Site
Abstract
Abstract We derive the conditions under which time-varying cointegration leads to cointegration spaces that may be time-invariant or, in contrast, time-varying. The model of interest is a vector error correction model with arbitrary time-varying cointegration parameters. We clarify the role of identification and normalization restrictions and show that structural breaks in error-correction models may actually correspond to stable long-run economic relationships, as opposed to a single-equation setup, in which an identification restriction is imposed. Moreover, we show that, in a time-varying cointegrating relationship with a given number of variables and cointegration rank, there is a minimum number of orthogonal Fourier functions that most likely guarantees time-varying cointegrating spaces.
Journal
Studies in Nonlinear Dynamics & Econometrics – de Gruyter
Published: Apr 11, 2013