Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework

Festschrift in Honor of Peter Schmidt, W.C. Horrace and R.C. Sickles, eds., Forthcoming

44 Pages Posted: 13 Apr 2011 Last revised: 23 Oct 2013

See all articles by Yongcheol Shin

Yongcheol Shin

Independent

Byungchul Yu

Dept. of International Trade, Dong-A University

Matthew Greenwood-Nimmo

University of Melbourne; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Date Written: October 21, 2013

Abstract

This paper develops a cointegrating nonlinear autoregressive distributed lag (NARDL) model in which short- and long-run nonlinearities are introduced via positive and negative partial sum decompositions of the explanatory variables. We demonstrate that the model is estimable by OLS and that reliable long-run inference can be achieved by bounds-testing regardless of the integration orders of the variables. Furthermore, we derive asymmetric dynamic multipliers that graphically depict the traverse between the short- and the long-run. The salient features of the model are illustrated using the example of the nonlinear unemployment-output relationship in the US, Canada and Japan.

Keywords: Asymmetric Cointegrating Relationships, Asymmetric Dynamic Multipliers, Nonlinear ARDL (NARDL) ECM-based Estimation and Tests, Nonlinear Unemployment-Output Relationship, Asymmetric Gasoline Price Adjustment

JEL Classification: C12, C13, J64

Suggested Citation

Shin, Yongcheol and Yu, Byungchul and Greenwood-Nimmo, Matthew, Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework (October 21, 2013). Festschrift in Honor of Peter Schmidt, W.C. Horrace and R.C. Sickles, eds., Forthcoming, Available at SSRN: https://ssrn.com/abstract=1807745 or http://dx.doi.org/10.2139/ssrn.1807745

Yongcheol Shin

Independent

Byungchul Yu

Dept. of International Trade, Dong-A University ( email )

2-Ga Bumin-Dong
Busan
Korea, Republic of (South Korea)

Matthew Greenwood-Nimmo (Contact Author)

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

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