- JOURNAL OF ECONOMETRICS Journal
- January 2014
- Part 2
Digital Object Identifier (DOI)
International Standard Serial Number (ISSN)
Electronic International Standard Serial Number (EISSN)
- The order of integration is valid to characterize linear processes; but it is not appropriate for non-linear worlds. We propose the concept of summability (a re-scaled partial sum of the process being O-p(1)) to handle non-linearities. The paper shows that this new concept, S (delta): (i) generalizes I (delta); (ii) measures the degree of persistence as well as of the evolution of the variance; (iii) controls the balancedness of non-linear relationships; (iv) opens the door to the concept of co-summability which represents a generalization of co-integration for non-linear processes. To make this concept empirically applicable, an estimator for delta and its asymptotic properties are provided. The finite sample performance of subsampling confidence intervals is analyzed via a Monte Carlo experiment. The paper finishes with the estimation of the degree of summability of the macroeconomic variables in an extended version of the Nelson-Plosser database.
- co-integration; co-summability; integrated processes; non-linear balanced relationships; non-linear processes; summability; macroeconomic time-series; asymptotics; cointegration; regressions; convergence; root