Multiple structural breaks in cointegrating regressions: a model selection approach

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Alexander Schmidt ◽  
Karsten Schweikert
Keyword(s):  
Structural Breaks ◽  
Penalized Regression ◽  
Adaptive Lasso ◽  
Test Statistics ◽  
New Approach ◽  
Multiple Structural Breaks ◽  
Long Run ◽  
Model Selection Approach ◽  
Regression Techniques ◽  
Lasso Estimator

Abstract In this paper, we propose a new approach to model structural change in cointegrating regressions using penalized regression techniques. First, we consider a setting with known breakpoint candidates and show that a modified adaptive lasso estimator can consistently estimate structural breaks in the intercept and slope coefficient of a cointegrating regression. Second, we extend our approach to a diverging number of breakpoint candidates and provide simulation evidence that timing and magnitude of structural breaks are consistently estimated. Third, we use the adaptive lasso estimation to design new tests for cointegration in the presence of multiple structural breaks, derive the asymptotic distribution of our test statistics and show that the proposed tests have power against the null of no cointegration. Finally, we use our new methodology to study the effects of structural breaks on the long-run PPP relationship.

scholarly journals A Reappraisal of the Prebisch-Singer Hypothesis Using Wavelets Analysis

2021 ◽  
Vol 14 (7) ◽  
pp. 319
Author(s):  
Hany Fahmy
Keyword(s):  
International Trade ◽  
Structural Breaks ◽  
Developing Economies ◽  
Commodity Prices ◽  
Commodity Price ◽  
Data Set ◽  
Price Series ◽  
Long Run ◽  
Starting Point ◽  
The Impact

The Prebisch-Singer (PS) hypothesis, which postulates the presence of a downward secular trend in the price of primary commodities relative to manufacturers, remains at the core of a continuing debate among international trade economists. The reason is that the results of testing the PS hypothesis depend on the starting point of the technical analysis, i.e., stationarity, nonlinearity, and the existence of structural breaks. The objective of this paper is to appraise the PS hypothesis in the short- and long-run by employing a novel multiresolution wavelets decomposition to a unique data set of commodity prices. The paper also seeks to assess the impact of the terms of trade (also known as Incoterms) on the test results. The analysis reveals that the PS hypothesis is not supported in the long run for the aggregate commodity price index and for most of the individual commodity price series forming it. Furthermore, in addition to the starting point of the analysis, the results show that the PS test depends on the term of trade classification of commodity prices. These findings are of particular significance to international trade regulators and policymakers of developing economies that depend mainly on primary commodities in their exports.

scholarly journals Causes for Deforestation in Indonesia: Corruption and Palm Tree Plantation

2015 ◽  
Vol 11 (27) ◽  
pp. 120
Author(s):  
Osama Eldeeb ◽  
Petr Prochazka ◽  
Mansoor Maitah
Keyword(s):  
Time Series ◽  
Palm Oil ◽  
Forest Cover ◽  
Palm Tree ◽  
Test Statistics ◽  
Crude Palm Oil ◽  
Tree Plantation ◽  
Long Run ◽  
Corruption Perception ◽  
Forest Cover Loss

<p>Indonesian biodiversity is threatened by massive deforestation. In this research paper, claims that deforestation in Indonesia is caused by corruption and supported by crude palm oil production is verified using time series analysis. Using Engel Granger cointegration test, three time series of data, specifically corruption perception index, rate of deforestation and price of crude palm oil are inspected for a long-run relationship. Test statistics suggests that there is no long-run relationship among these variables. Authors provide several explanations for this result. For example, corruption in Indonesia, as measured by CPI is still very high. This may mean that forest cover loss is possible even though there is a positive change in corruption level. According to the results, crude palm oil price has also no effect upon forest cover loss. This is likely due to very low shut-down price of crude palm oil for which production is still economical.</p>

Foreign Capital, Natural Resource Rents and Financial Development: A New Approach

2020 ◽  
pp. 097215092096136
Author(s):  
Muhammad Shahbaz ◽  
Mohammad Ali Aboutorabi ◽  
Farzaneh Ahmadian Yazdi
Keyword(s):  
Financial Development ◽  
Natural Resource ◽  
Capital Accumulation ◽  
Foreign Capital ◽  
New Approach ◽  
Resource Rents ◽  
Long Run ◽  
Natural Resource Rents ◽  
Rich Countries ◽  
The Impact

This article explores the impact of financial development on the ‘natural resources rents–foreign capital accumulation nexus’ in selected natural resource–rich countries during 1970Q1–2016Q4. In doing so, we propose a new approach by applying the autoregressive distributed lag (ARDL) rolling regression technique for our empirical purpose. The results show that financial development has a positive and significant effect on the way natural resource rents affect foreign capital in the case of Australia, Chile, Ecuador, Egypt and Peru in both the short run and the long run. We achieve the same results in the case of Colombia and Iran too, but just in the long run. Also, short-term and long-term negative effects of financial development on the rents–foreign capital nexus are witnessed just in the case of Algeria. We provide some empirical evidence for further robustness of our findings. Finally, we suggest that there is a necessity for the development of the financial system in natural resource–rich countries to reach higher levels of foreign capital, which has a crucial role in their economic growth.

On the Adaptive Control of the False Discovery Rate in Multiple Testing With Independent Statistics

2000 ◽  
Vol 25 (1) ◽  
pp. 60-83 ◽  
Author(s):  
Yoav Benjamini ◽  
Yosef Hochberg
Keyword(s):  
False Discovery Rate ◽  
Multiple Testing ◽  
Meta Analysis ◽  
Test Statistics ◽  
Adaptive Procedure ◽  
New Approach ◽  
False Discovery ◽  
Behavioral Studies ◽  
Simultaneous Testing ◽  
Independent Test

A new approach to problems of multiple significance testing was presented in Benjamini and Hochberg (1995), which calls for controlling the expected ratio of the number of erroneous rejections to the number of rejections–the False Discovery Rate (FDR). The procedure given there was shown to control the FDR for independent test statistics. When some of the hypotheses are in fact false, that procedure is too conservative. We present here an adaptive procedure, where the number of true null hypotheses is estimated first as in Hochberg and Benjamini (1990), and this estimate is used in the procedure of Benjamini and Hochberg (1995). The result is still a simple stepwise procedure, to which we also give a graphical companion. The new procedure is used in several examples drawn from educational and behavioral studies, addressing problems in multi-center studies, subset analysis and meta-analysis. The examples vary in the number of hypotheses tested, and the implication of the new procedure on the conclusions. In a large simulation study of independent test statistics the adaptive procedure is shown to control the FDR and have substantially better power than the previously suggested FDR controlling method, which by itself is more powerful than the traditional family wise error-rate controlling methods. In cases where most of the tested hypotheses are far from being true there is hardly any penalty due to the simultaneous testing of many hypotheses.

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