Functional coefficient cointegration models with Box-Cox transformation

摘要

This paper considers a functional coefficient cointegration model where the dependent variable is subject to a Box-Cox transformation. A profile method is proposed to estimate the Box-Cox transformation parameter beta(0). We first approximate the functional coefficients by sieve method assuming that beta(0) is known. Then an extremum estimator of beta(0) is proposed based on a loss function which measures the relative variation of the regression residual compared to the variation in the transformed dependent variable. Finally, a plug-in estimator of the functional coefficients is obtained. Asymptotic properties of the proposed estimators are developed. Numerical results demonstrate the nice performance of the estimators and corroborate the theoretical development.

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