Extension of Johansen Procedure ca.jo
Dear all, I extended the basics of the ca.jo function to incorporate five different cases: nc: no constant rc: restricted constant, i.e. constant in cointegration vector uc: unrestricted constant, i.e. constant in the deterministic part of the model crt: restricted constant + trend, i.e. constant and trend in the cointegration vector ct: constant + unrestricted trend, i.e. constant and trend in the deterministic part of the model I checked the results against the results of JMulti with the same data set and the same case. Please mind, that the results can't be used for further analysis in the "vars" package yet, since this will need some more work on the underlying ca.jo class of results. Also I didn't pay a lot of attention to the "transitory" specification, so if there are any errors, please let me know. Best, Johannes
On 16.10.2015 14:27, Johannes Lips wrote:
Dear list, I am currently working on an extension of the basic ca.jo() function to also make it possible to incorporate structural breaks, like in Johansen et al. (2000). What I basically do is to add a matrix, which incorporates possible structural breaks in the cointegration vector. Therefore I added the function paramter break.matrix, which so far takes the break matrix according to the H_l(r) case of Johansen et al. (2000). I construct the dummy matrix according to Joyeux (2007) and add them to the dumvar and the break.matrix parameter of the ca.jo function. So far it "works", but I am unsure if I made all the adjustments of the ca.jo function correctly and I would be really glad if someone could also take a look at the function and see if it does, what it's supposed to do. I uploaded the function to my github repo at [1], where I also provide the code to create the dummy matrix incorporating the possible structural breaks. Please note, that the creation of the dummy matrix is also not yet finished and most probably also needs some changes and is only for the purpose of testing the ca.jomoni() function. Thanks in advance, Johannes [1] https://github.com/hannes101/CointegrationAnalysis References: Johansen, S?ren, Rocco Mosconi, and Bent Nielsen (2000). ?Cointegration analysis in the presence of structural breaks in the deterministic trend?. en. In: Econometrics Journal 3.2, pp. 216?249. doi: 10.1111/1368- 423X.00047 (cit. on p. 6). Joyeux, Roselyne (2007). ?How to Deal with Structural Breaks in Practical Cointegration Analysis?. English. In: Cointegration for the Applied Economist. Ed. by B. Bhaskara Rao. 2nd edition. Palgrave Macmillan, p. 256 (cit. on p. 6).