[R-SIG-Finance] Extension of Johansen Procedure ca.jo

[Johannes Lips]

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, Søren, 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).
>
>