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End-Of-Sample Cointegration Breakdown Tests, Donald W.K. Andrews, Jae-Young Kim

Cowles Foundation Discussion Papers

This paper introduces tests for cointegration breakdown that may occur over a relatively short time period, such as at the end of the sample. The breakdown may be due to a shift in the cointegrating vector or due to a shift in the errors from being I (0) to being I (1). Tests are introduced based on the post-breakdown sum of squared residuals and the post-breakdown sum of squared reverse partial sums of residuals. Critical values are provided using a parametric subsampling method. The regressors in the model are taken to be arbitrary linear combinations of deterministic, stationary, and integrated …