An integrated modified OLS RESET test for cointegrating regressions
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Date
2014-10
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Abstract
We propose a RESET-type test for the null hypothesis of linearity of a cointegrating relationship
with an asymptotic chi-squared null distribution. The test is based on an extension of the
Integrated Modified OLS estimator of Vogelsang and Wagner (2014) from linear cointegrating
relationships to multivariate cointegrating polynomial relationships. For the case of full design
we furthermore provide fixed-b asymptotic theory for our RESET test. The theoretical results
are complemented by a small simulation study.
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Keywords
bandwidth, specification test, kernel, IM-OLS, fixed-b asymptotics, cointegration, nonlinearity