Fitting Asymmetric Error Correction Model

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Description

Estimate an asymmetric error correction model (ECM) for two time series.

Usage

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  ecmAsyFit(y, x, lag = 1, split = TRUE, 
    model = c("linear", "tar", "mtar"), thresh = 0)

Arguments

y

dependent or left-side variable for the long-run regression.

x

independent or right-side variable for the long-run regression.

lag

number of lags for variables on the right side.

split

a logical value (default of TRUE) of whether the right-hand variables should be split into positive and negative parts.

model

a choice of three models: linear, tar , or mtar cointegration.

thresh

a threshold value; this is only required when the model is specified as 'tar' or 'mtar.'

Details

There are two specficiations of an asymmetric ECM. The first one is how to calculate the error correction terms. One way is through linear two-step Engle Granger approach, as specificied by model="linear". The other two ways are threshold cointegration by either 'tar' or 'mtar' with a threshold value. The second specification is related to the possible asymmetric price transmission in the lagged price variables, as specified in split = TRUE. Note that the linear cointegration specification is a special case of the threshold cointegration. A model with model="linear" is the same as a model with model="tar", thresh = 0.

Value

Return a list object of class "ecm" and "ecmAsyFit" with the following components:

y

dependend variable

x

independent variable

lag

number of lags

split

logical value of whether the right-hand variables are split

model

model choice

IndVar

data frame of the right-hand variables used in the ECM

name.x

name of the independent variable

name.y

name of the dependent variable

ecm.y

ECM regression for the dependent variable

ecm.x

ECM regression for the independent variable

data

all the data combined for the ECM

thresh

thresh value for TAR and MTAR model

Methods

Two methods are defined as follows:

print:

showing the key outputs.

summary:

summarizing thekey outputs.

Author(s)

Changyou Sun (cs258@msstate.edu)

References

Enders, W., and C.W.J. Granger. 1998. Unit-root tests and asymmetric adjustment with an example using the term structure of interest rates. Journal of Business & Economic Statistics 16(3):304-311.

See Also

print.ecm; summary.ecm; ecmDiag; and ecmAsyTest.

Examples

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# see example at daVich