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The Parameter Estimation And Application Research On Threshold Cointegration

Posted on:2010-09-24Degree:DoctorType:Dissertation
Country:ChinaCandidate:J ZhangFull Text:PDF
GTID:1119360275486923Subject:Quantitative Economics
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Cointergration theory indicates that if a stationary error series could be conclude from linear combination of two or more same-order nonstationary time series, there is long-run equilibrium relationship in these nonstationary time series. The basic concept of cointergration characterizes the long-run equilibrium relationship between variables, while ECM deviding from cointergration characterizes the adjustment behavior of cointergration vector from short-run divergence to long-run equilibrium. Traditional linear cointegration theory and ECM can be used widely in time series analysis. But,they impose two basic restrictions :(1) It is continuous in the period of adjustment from short-run divergence to long-run equilibrium; (2)The speed of adjustment is symmetric,whichs means this adjustment shifts to equilibrium level at same speed regardless of divergence scale. However, these hypotheses were not always satisfied in the actual economy because of the adjustment costs and other factors. Then, the linear cointegration model may be incorrect. For this defect of the traditional theory, threshold cointegration theory, which introduced the non-linear threshold autoregressive(TAR) into cointegration model and expands the scope of application, has been a frontier study of econometrics.While extending traditional linear cointegration theory to non-linear theory, threshold cointegration model has made great contributions to the development of cointegration theory. Because of the wide applications, it receives adequate attentions and the rapid development in foreign countries. However, in our country, the relevant research is very little, even in its infancy stage. This paper introduces systematically the theoretical background, model specification, estimation and testing method of the threshold cointegration model, and do a intensive study for the theory and application. The followings are the main contributions of this paper: (1) Theoretical innovation. There are very little study for the distribution characteristics of cointegration coefficient of threshold cointegration model in available literature. Based on the monto carlo simulation ,we find that the overall samples distribution of long-run equilibrium coefficient is very close to normal distribution, but there are a significant difference between the distributions of cointegration variables' equilibrium coefficient indifferent regimes. This study is an exploratory survey in distribution characteristics of threshold cointegration coefficient, and it has important methodology sigificance. (2) Innovation on research methods and perspectives. Most research on the relationship between CPI and PPI use traditional linear cointergration model, while in this paper we do empirical study with nonlinear Threshold Vector Error Corrector Model. The transmit direction of CPI and PPI is not the same in different inflation levels, and the speed which CPI adjust to equilibrium level varies significantly. This paper sets up a threshold cointergration model to analyze gasoline prices and international crude oil prices, and confirms the phenomenon that gasoline prices in China easily rise but not fall in the perspective of econometrics. (3) This paper has rich economic and policy sense. The estimated results shows that in higher inflation, the transmit from PPI to CPI is significant and CPI declines slowly, while in lower inflation, CPI declines following by PPI decline and adjusts to equilibrium level relatively fast. To some extent, this implies that cost-push is an important factor in China's inflation, and deflation is mostly caused by the shortage of effective demand. Therefore,we should focus on improving the supply side to control inflation, and expanding aggregate demand to deal with deflation. Meanwhile, the adjustment of gasoline prices in China to international crude oil prices also rise rapidly and falls slowly, which exposes the defects of the existing pricing mechanism. Obviously, only from nonlinear threshold cointergration models could we get those findings. From this point, this dissertation has much significance of knowledge and application.
Keywords/Search Tags:Threshold Cointergration, Threshold Vector Error Corrector Model(TVECM), Threshold Effect, Consumer Price Index(CPI), Producer's Price Index for Manufactured Products(PPI), Price of Gasoilne, Price of Crude Oil
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