Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework

  • Shin Y
  • Yu B
  • Greenwood-Nimmo M
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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.

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Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework. In Festschrift in Honor of Peter Schmidt (pp. 281–314). Springer New York. https://doi.org/10.1007/978-1-4899-8008-3_9

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