Stata module to perform gregory hansen test for cointegration with regime shifts, statistical software components s457327, boston college department of economics, revised 30 sep 20. Cointegration test including multiple breaks using gauss is another silenced clip from our online course in econometrics using gauss. The formal theory of philips and ouliaris 1990 showed that for the linear cointegration test, critical values depend on the number of regressors. These exercises provide a good first step toward understanding cointegrated processes. The advantage of the gregory hansen test is that it accounts for structural breaks by testing the null hypothesis of no cointegration against the alternative of cointegration with a single shift at an unknown point in time. Gregory and hansen test with stata hi, i want to perform gregory and hansen test cointegration test of times series with structurals break. Pretest the variables for the presence of unit roots done above and check if they are integrated of the same order. Lecture 18 cointegration bauer college of business. The tests also produce maximum likelihood estimates of the parameters in a vector errorcorrection vec model of the cointegrated series. Besides the classical augmented dickeyfuller adf test, we analyse the performance of phillipsouliaris tests and of cointegration tests developed by gregory and hansen 1996. Gregory and hansen tests propose three structural breaks for the money demand function. Cointegration says that they wander together, meaning that there is a longrun equilibrium relationship among the series.
Based on gregoryhansen test for cointegration, analysis supports the existence of one cointegration vector. Gregory and hansen propose the cointegration tests which accommodates a single endogenous break in an underlying cointegrating relationship. The first task is to import the urca library itself. Interpretation of johansen cointegration test in r. Pre test the variables for the presence of unit roots done above and check if they are integrated of the same order. The gregory and hansen 1996 cointegration test is a residualbased cointegration test which tests the null hypothesis of no cointegration against the alternative of cointegration in. To test for johansen cointegration in a var setup, we have to feed the number of lags. This module should be installed from within stata by typing ssc install ghansen. After that, it calls the subroutine that will carry out the gregoryhansen cointegration test.
Cointegration means that the two time series comove together in the long term, therefore cannot drift apart very much and for too long from each other granger, 1981. There are several other tests for testing the unit root. As gregory and hansen point out in their journal of econometrics paper. Change in level number of obs 96 lags 1 chosen by akaike criterion maximum lags 5 test breakpoint date asymptotic critical values statistic 1% 5% 10% adf 3.
The first thing you should do always is to sketch the englegranger test, explaining the null and the alternative hypotheses. In the second step the cointegration of the series is tested. The program estimates a single equation cointegrating regression by least squares allowing for. The analysis will be carried out up to maximum of 8 lags and akaike information criterion will be used to decide the optimum lag length. The gregoryhansen approach is an extension of similar tests for unit root tests with structural breaks, for example, by zivot and andrews 1992. A stata procedure ghansen has been written by jorge perez. The program performs residualbased cointegration tests on this model. Residualbased tests for cointegration in models with regime shifts. Since the critical values used for the maximum eigenvalue and trace test statistics are based on a.
However, i fixed the program for the specific bug in question and. In the opaque terminology used in the time series literature, each. By means of the hansen methodology 1996, 1999, i would like to test whether the debtgrowth relationship is nonlinear. Cointegration, structural breaks and the demand for money in.
After that, it calls the subroutine that will carry out the gregory hansen cointegration test. One way to test the existence of cointegration is the regression method see, engle and granger 1986 eg. We will make use of the urca library, written by bernhard pfaff and matthieu stigler, which wraps up the johansen test in an easy to call function ca. For the two nonlinear versions you are interested in. Testing for cointegration using the johansen methodology. Residualbased tests for cointegration and multiple regime shifts. The gregoryhansen cointegration test is used to test for cointegration in the presence of break points or structural changes in a model. Stata module to perform gregoryhansen test for cointegration with regime shifts, statistical software components s457327, boston college department of economics, revised 30 sep 20. The gregoryhansen and the enderssiklos tests are both residual based test. Cointegration analysis of oil prices and consumer price index in south africa using stata software sukati, mphumuzi ministry of agriculture september 20 online at mpra paper no.
As gregory and hansen point out in their journal of econometrics paper different from the one you are reffering, see the help file of ghansen this is not a test of whether there is a break or not. Testing for cointegration using johansens methodology johansens methodology takes its starting point in the vector autoregression var of order p given by yt. Residualbased tests for cointegration in models with regime. I have two time series which fail eg cointegration test over the whole sample, but gh cointegration test indicates the presence of cointegration when regime shift is allowed. Can i set up a dummy taking on value 0 before and 1 after the regime shift where the date of regime shift is identified by gh and include it in the ecm to estimate. Based on gregory hansen test for cointegration, analysis supports the existence of one cointegration vector. The cointegrating regression is allowed to have a trend or not, and can have either a break in the intercept only or a break in all coefficients. Inference when a nuisance parameter is not identified under the null hypothesis. Testing for cointegration using the johansen methodology when. I then perform a test for cointegration using the engle and granger 1987 method. Hansen residualbased tests for cointegration in models with regime shifts journal of econometrics 1996 program and data files. For example, if one uses the adf test, the test regression is. Cointegration analysis of oil prices and consumer price index. The gregory and hansen 1996 cointegration test is a residualbased cointegration test which tests the null hypothesis of no cointegration against the alternative of cointegration in the presence of a single regime shift.
In the specification above, the analysis will assume a level shift with trend. Providing private online courses in econometrics research. This one lets me use an information criterion, such as hqic, aic or sbic, to choose the optimal lag length. If the h0 unit root cannot be rejected, then the next step is to test cointegration among the components, i. We are now going to apply this method to a few currency pairs using three different software eviews, stata and matlab 1. Now that weve outlined the theory of the test we are going to apply it using the r statistical environment.
The latter are conceived to be robust to regime shifts in the cointegration vector. On april 23, 2014, statalist moved from an email list to a forum. Structural breaks, cointegration and the demand for money in. The maki test for cointegration with multiple structural breaks. The analysis will be carried out up to maximum of 8 lags and akaike information criterion will be. I have tried with eviews 7 and stata 11 but failed to find the result.
Gregoryhansen test for cointegration with regime shifts, statistical software. In stata i would actually recommend the package egranger. At this lag of 4, ar roots lie outside the unit circle and theres also autocorrelation. Cointegration and the ecm two nonstationary time series are cointegrated if they tend to move together through time. These structural breaks occurred in 2008q3, 2009 q1 and 2010q1. I have a question regarding an econometric procedure i would like to apply in order to test if the relationship between economic growth and public debt ratio is nonlinear. Kindly help me which software should be suitable to conduct this analysis and how to. In this post, i use simulated data to show the asymptotic properties of an ordinary leastsquares ols estimator under cointegration and spurious regression. Cointegration test including multiple breaks using gauss. What are the codes for testing structural breaks in stata. Gregory and hansen1996, residualbased tests for cointegration in models with regime shifts, journal of econometrics, vol 70, 99126. You should test for cointegration without breaks first i. What you are rejecting is the null of no cointegration against the alternative of cointegration with a shift in the mean in 1979.
Apr 02, 2018 the gregory hansen cointegration test is used to test for cointegration in the presence of break points or structural changes in a model. And in stata 15, we can now test for cointegration using the xtcointtest command. This module should be installed from within stata by typing ssc install. The advantage of the gregoryhansen test is that it accounts for structural breaks by testing the null hypothesis of no cointegration against the alternative of cointegration with a single shift at an unknown point in time.
The gregory hansen and the enderssiklos tests are both residual based test. To analyse the cointegration between variables with structural breaks switching regime by carrying out gregory and hansen 1996s test residualbased tests for cointegration in models with. The stata blog cointegration or spurious regression. Examples of the types of papers include 1 expository papers that link the use of stata commands. Dear sir, i have a question on the lag order for the johansen cointegration test. Estimation and inference in cointegration models economics 582. The test can be used for single break points and when the. Could anyone help me regarding estimation of gregoryhansen. I may code it more carefully and add it with critical values into my r package eiadata. The gregory hansen approach is an extension of similar tests for unit root tests with structural breaks, for example, by zivot and andrews 1992. Johansen test for cointegrating time series analysis in r. May 25, 2017 cointegration test including multiple breaks using gauss is another silenced clip from our online course in econometrics using gauss.
Residualbased tests for cointegration in models with. Sep 06, 2016 in this post, i use simulated data to show the asymptotic properties of an ordinary leastsquares ols estimator under cointegration and spurious regression. Gregory and hansen 1996, residualbased tests for cointegration in models with regime shifts, journal of econometrics, vol 70, 99126. As gregory and hansen point out in their journal of econometrics paper different from the one you are reffering, see the help file of ghansen this is not a. For posting your own programs to share with others. For instance, we have established that the levels of the fed funds rate and the 3year bond rate are nonstationary, whereas their differences are stationary.
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