Abstract

We develop a one-step test for multicointegration of I(2) series while allowing for threshold adjustment to the steady state in both layers of cointegration. Our results suggest that the limiting distributions of the estimators and test statistics associated with multicointegration depend on the cut-off point of the asymmetric response. We demonstrate the application of the test using military expenditure and price data for the United Kingdom for the period 1960-2022. We then suggest, in a step-by-step manner, modeling choices that a practitioner would have to make depending on the outcome of the multicointegration test.

Original language	en
Pages (from-to)	1-14
Volume	55
Issue number	11
Publication status	Published - 2025