- <Source Information> Jin Seo Cho, Matthew Greenwood-Nimmo and Yongcheol Shin (2023): Working Paper.
- <Abstract> We investigate the relationship between R\&D expenditure and investment using a nonlinear autoregressive distributed lag (NARDL) model. We propose a two-step NARDL (2SNARDL) estimation framework, that is free from the asymptotic singular matrix issue. We first estimate the parameters of the long-run relationship by the fully-modified least squares estimator and estimate the dynamic parameters in the next step. Under mild regularity conditions, we establish consistency of the 2SNARDL estimator
and derive the relevant limit distributions. We also develop Wald test statistics for the hypotheses of short-run and long-run parameter asymmetry. By applying the 2SNARDL estimation procedure we find that R\&D expenditure is asymmetrically associated with investment in the U.S.