Cointegration and Threshold Adjustment

24 Pages Posted: 24 Feb 1998

See all articles by Pierre L. Siklos

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs

Walter Enders

University of Alabama - Department of Economics, Finance and Legal Studies

Multiple version iconThere are 2 versions of this paper

Date Written: January 1998

Abstract

Cointegration among interest rates for instruments with different maturities has been widely tested with mixed results. This paper provides an extension to the Engle-granger testing strategy by permitting asymmetry in the adjustment toward equilibrium in two different ways. We demonstrate that our test has good power and size properties over the Engle-Granger test when there are asymmetric departures from equilibrium. Empirical tests using US yields confirm the asymmetric nature of error correction among interest rates of different maturities.

JEL Classification: E43, C22, C50

Suggested Citation

Siklos, Pierre L. and Enders, Walter, Cointegration and Threshold Adjustment (January 1998). Available at SSRN: https://ssrn.com/abstract=62008 or http://dx.doi.org/10.2139/ssrn.62008

Pierre L. Siklos (Contact Author)

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
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HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

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Waterloo, ON N2L 6C2
Canada

Walter Enders

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
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Tuscaloosa, AL 35487
United States
205-348-8972 (Phone)
205-348-0590 (Fax)

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