Structural Break and Cointegration
Posted: Mon Jun 10, 2013 10:53 am
Hi,
I'm analyzing the sustainability of the current account of Peru through the cointegration method of Engle and Granger and Johansen. Measuring long-term relationship between imports and exports.
I have found structural break in the series of imports, how I can fix it?
Without correcting for break, I find that there is no cointegration between exports and imports in Peru under both methods. Which leads me to think that the break is generating the program think that the series share a stochastic trend, when in fact imports and exports in Peru are series with deterministic trend, so there would be no cointegration...
Thanks..
I'm analyzing the sustainability of the current account of Peru through the cointegration method of Engle and Granger and Johansen. Measuring long-term relationship between imports and exports.
I have found structural break in the series of imports, how I can fix it?
Without correcting for break, I find that there is no cointegration between exports and imports in Peru under both methods. Which leads me to think that the break is generating the program think that the series share a stochastic trend, when in fact imports and exports in Peru are series with deterministic trend, so there would be no cointegration...
Thanks..