Testing for cointegration in nonlinear asymmetric smooth transition error correction models

The present paper proposes an alternative procedure to test for cointegration in asymmetric exponential smooth transition autoregressive (AESTAR) model. The proposed new F-statistics test the null hypothesis of no cointegration against the alternative hypothesis of cointegration with asymmetric ESTAR adjustment. We derive the nonstandard limit distributions analytically via Monte Carlo simulations. We also study the finite sample properties and the power of proposed tests with Monte Carlo simulations and find that the empirical sizes of two tests are quite close to the nominal one and the proposed tests do not lead to over-rejections of the null hypothesis of no cointegration.

Automated summary

The paper introduces an alternative procedure to test for cointegration in the AESTAR model and derives the nonstandard limit distributions through Monte Carlo simulations. The study also examines the finite sample properties and power of the proposed tests, showing that they do not result in over-rejections of the null hypothesis of no cointegration.