In this paper, we introduce threshold-type nonlinearities within a single-equation cointegrating regression model and propose a testing procedure for testing the null hypothesis of linear cointegration vs. cointegration with threshold effects. Our framework allows the modelling of long-run...

The notion of separation in cointegrated systems helps identifying possible sub-system structures that may reduce the complexity of larger systems by yielding a more parsimonious representation of the time series. In this paper the authors demonstrate that although the subsystem cointegration...