Title: Buffered vector error-correction models
Authors: Philip Yu - The University of Hong Kong (Hong Kong) [presenting]
Renjie Lu - The University of Hong Kong (Hong Kong)
Abstract: The buffered autoregressive model is extended to the buffered vector error correction model (VECM). Least squares estimation and a reduced-rank estimation are discussed, and the consistency of the estimators on the delay parameter and threshold parameters is derived. We also propose a supWald test for the presence of buffer-type threshold effect. Under the null hypothesis of no threshold, the supWald test statistic converges to a function of Gaussian process. A bootstrap method is proposed to obtain the p-value for the supWald test. We investigate the effectiveness of our methods by simulation studies. We apply our model to study the monthly Federal bond rates of United States and identify evidences of buffering regimes in the bond rates.