Monte Carlo tests of cointegration with structural breaks

The power and size of five cointegration tests, the ADF-, (Z) over cap (alp ha)-, ECM-; SW-, and JJ-statistics, are evaluated in some large-scale Monte Carlo simulations, when the underlying system is subjected to regime shift s. Following the suggestion by Gregory and Hansen, selects the minimum valu e for the shift-corrected statistics evaluated over a set of tentative brea k Points for the regime shifts. The performance of these statistics is comp ared to the corresponding ordinary statistics in conditions of regime shift s. The results show that no test uniformly outperforms the others in terms of power in the parameter space we have used.