PRACTITIONERS CORNER: Tests for Cointegration in Models with Regime and Trend Shifts
Allan W. GregoryBruce E. Hansen†The first author acknowledges financial support the Social Sciences and Humanities Research Council of Canada. The second author thanks the National Science Foundation for financial support
1996en
ABI
Abstract
ABSTRACT Recently Gregory and Hansen (1996) proposed a number of residual‐based tests for cointegration in models with the possibility of a structural break. They considered three models: (i) level shift; (ii) level shift with trend; and (iii) regime shift (both level shift and slope coefficients can change). We introduce a more general model that permits a trend shift as well as a regime shift and we provide the critical values appropriate for testing this hypothesis.
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