Cointegration analysis with structural breaks and deterministic trends: an application to the Canadian dollar
Abstract:This article applies recent developments in cointegration analysis with structural breaks and deterministic trends to analyse the relationship between the real Canada-US exchange rate and commodity prices. Previous empirical studies disagree on whether these variables are cointegrated. The root of disagreement could be in the handling of deterministic trends and potential structural breaks. I find that even after controlling for these matters, the question of whether the real exchange rate and commodity prices are cointegrated for Canada remains unresolved.
Document Type: Research Article
Affiliations: Department of Economics, University of Saskatchewan, 9 Campus Drive, Saskatoon, SK S7N 5A5, Canada
Publication date: September 1, 2010