segmcoint 1.0.0
Tests for Segmented Cointegration: Kim (2003) and Martins & Rodrigues (2022)
License: MIT
Requires Python: >=3.9
Keywords: cointegration, segmented cointegration, unit root, structural breaks, time series, econometrics

# segmcoint

**Tests for Segmented Cointegration**

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A Python library implementing rigorous tests for segmented cointegration from two seminal econometric papers:

1. **Kim, J.-Y. (2003)**. *Inference on Segmented Cointegration*. Econometric Theory, 19, 620–639.
2. **Martins, L.F. and Rodrigues, P.M.M. (2022)**. *Tests for Segmented Cointegration: An Application to US Governments Budgets*. Empirical Economics, 63, 567–600.

## Overview

Cointegration relations are often interpreted as long-run equilibrium relationships. In practice, however, real data frequently fail to confirm cointegration for well-understood economic relations. This package addresses the possibility that failure to confirm cointegration is due to **nonstationary deviations in a relatively small portion of the data** ("short-run"), while the cointegration relation prevails in the remaining periods—a situation called **segmented cointegration**.

### Kim (2003) Tests

- Phillips–Perron–Ouliaris type tests: $Z^*_\rho(\mathcal{C})$ and $Z^*_t(\mathcal{C})$
- Augmented Dickey–Fuller type tests: $ADF^*_\rho(\mathcal{C})$ and $ADF^*_t(\mathcal{C})$
- Extremum estimator for break date identification (Eq. 3.16–3.17)
- Critical values from Tables 1 and 2 of the paper (for $\bar{\ell}(\mathcal{T}_N) = 0.3$)

### Martins & Rodrigues (2022) Tests

- Wald-type statistics: $F_A(\tau, m^*)$ and $F_B(\tau, m^*)$ (Eq. 3.2)
- Supremum statistics: $\sup F_A(m^*)$ and $\sup F_B(m^*)$ (Eq. 3.3)
- Combined test: $W(m^*)$ (Eq. 3.4)
- Double maximum test: $W_{\max}$ (Eq. 3.5)
- Critical values from Table 1 of the paper
- Break date estimation (Remark 3)

## Installation

```bash
pip install .
```

Or for development:

```bash
pip install -e ".[dev]"
```

## Quick Start

```python
import numpy as np
from segmcoint import kim_test, mr_test, generate_segmented_data

# Generate data with segmented cointegration
y, X, eps, info = generate_segmented_data(T=200, rho=0.85, seed=42)

# Kim (2003) tests
res_kim = kim_test(y, X, model='drift')
print(res_kim)

# Martins & Rodrigues (2022) tests
res_mr = mr_test(y, X, model='drift')
print(res_mr)
```

## Model Specifications

Three deterministic specifications are supported, following Kim (2003, Eq. 2.1a–2.1c):

| Model    | Equation                                                | Kim (2003) | M&R (2022) |
|----------|---------------------------------------------------------|------------|------------|
| `'none'` | $x_{1t} = \beta' x_{2t} + \varepsilon_t$              | Case I     | No det.    |
| `'drift'`| $x_{1t} = \alpha + \beta' x_{2t} + \varepsilon_t$     | Case II    | Intercept  |
| `'trend'`| $x_{1t} = \alpha + \gamma t + \beta' x_{2t} + \varepsilon_t$ | Case III | Int.+Trend |

## API Reference

### `kim_test(y, X, model, max_ell, step, ...)`

Computes the infimum test statistics from Kim (2003). Returns a `KimTestResult` object.

### `mr_test(y, X, model, max_breaks, epsilon, step, ...)`

Computes the Wald-type test statistics from Martins & Rodrigues (2022). Returns an `MRTestResult` object.

### `kim_break_estimator(y, X, model, max_ell, step)`

Extremum estimator for the noncointegration period (Kim 2003, Eq. 3.16–3.17).

### `generate_segmented_data(T, beta, rho, ...)`

Generate simulated data from a segmented cointegration DGP.

## Testing

```bash
pytest tests/ -v
```

## Author

**Dr Merwan Roudane**  
Email: merwanroudane920@gmail.com  
GitHub: [https://github.com/merwanroudane/segmcoint](https://github.com/merwanroudane/segmcoint)

## License

MIT License

## References

- Kim, J.-Y. (2003). Inference on Segmented Cointegration. *Econometric Theory*, 19, 620–639.
- Martins, L.F. and Rodrigues, P.M.M. (2022). Tests for Segmented Cointegration: An Application to US Governments Budgets. *Empirical Economics*, 63, 567–600.
- Phillips, P.C.B. and Ouliaris, S. (1990). Asymptotic Properties of Residual Based Tests for Cointegration. *Econometrica*, 58, 165–193.
- Kejriwal, M., Perron, P., and Zhou, J. (2013). Wald Tests for Detecting Multiple Structural Changes in Persistence. *Econometric Theory*, 29, 289–323.