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A Class Test for Fractional Integration

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Author Info
Melvin Hinich (University of Texas, Austin)
Terence Chong (The Chinese University of Hong Kong)

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Abstract

Diebold and Rudebusch (1991) and Haubrich (1993) argue that, when income follows a fractionally differenced process, the Deaton's excessive smoothness paradox can be resolved. A key to the success of their result relies on a valid test for fractional integration. However, most of the tests in the literature are nested within fractional alternatives. This paper designs a new test for a more general hypothesis that the true data generating process is indeed fractionally integrated. The test is applied to the real disposable income per capita of the U.S. and the real quarterly GDP data of the G7 industrial countries.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 11 (2007)
Issue (Month): 2 ()
Pages: 1382-1382
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Handle: RePEc:bep:sndecm:11:2007:2:1382-1382

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Related research
Keywords: Deaton's Paradox fractional integration

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Sowell, Fallaw, 1992. "Maximum likelihood estimation of stationary univariate fractionally integrated time series models," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 165-188. [Downloadable!] (restricted)
  2. Crato, Nuno & Rothman, Philip, 1994. "Fractional integration analysis of long-run behavior for US macroeconomic time series," Economics Letters, Elsevier, vol. 45(3), pages 287-291. [Downloadable!] (restricted)
  3. Velasco, Carlos, 1999. "Non-stationary log-periodogram regression," Journal of Econometrics, Elsevier, vol. 91(2), pages 325-371, August. [Downloadable!] (restricted)
  4. Laura Mayoral, 2007. "Minimum distance estimation of stationary and non-stationary ARFIMA processes," Econometrics Journal, Royal Economic Society, vol. 10(1), pages 124-148, 03. [Downloadable!] (restricted)
    Other versions:
  5. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July. [Downloadable!] (restricted)
  6. Tieslau, Margie A. & Schmidt, Peter & Baillie, Richard T., 1996. "A minimum distance estimator for long-memory processes," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 249-264. [Downloadable!] (restricted)
  7. Wright, Jonathan H., 1999. "The Local Asymptotic Power Of Certain Tests For Fractional Integration," Econometric Theory, Cambridge University Press, vol. 15(05), pages 704-709, October. [Downloadable!]
  8. Chong, Terence Tai-Leung, 2000. "Estimating the differencing parameter via the partial autocorrelation function," Journal of Econometrics, Elsevier, vol. 97(2), pages 365-381, August. [Downloadable!] (restricted)
    Other versions:
  9. Hassler, Uwe & Wolters, Jurgen, 1995. "Long Memory in Inflation Rates: International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 37-45, January.
  10. Haubrich, Joseph G, 1993. "Consumption and Fractional Differencing: Old and New Anomalies," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 767-72, November. [Downloadable!] (restricted)
    Other versions:
  11. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June. [Downloadable!] (restricted)
    Other versions:
  12. Terence Tai-Leung Chong, 2006. "The polynomial aggregated AR(1) model," Econometrics Journal, Royal Economic Society, vol. 9(1), pages 98-122, 03. [Downloadable!] (restricted)
  13. Katsumi Shimotsu & Peter C.B. Phillips, 2000. "Local Whittle Estimation in Nonstationary and Unit Root Cases," Cowles Foundation Discussion Papers 1266, Cowles Foundation, Yale University, revised Sep 2003. [Downloadable!]
  14. Marc Henry & Paolo Zaffaroni, 2002. "The long range dependence paradigm for macroeconomics and finance," Discussion Papers 0102-19, Columbia University, Department of Economics. [Downloadable!]
  15. David K. Backus & Stanley E. Zin, 1993. "Long-memory Inflation Uncertainty: Evidence from the Term Structure of Interest Rates," NBER Technical Working Papers 0133, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Lo, Andrew W, 1991. "Long-Term Memory in Stock Market Prices," Econometrica, Econometric Society, vol. 59(5), pages 1279-313, September. [Downloadable!] (restricted)
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  17. Shea, Gary S, 1991. "Uncertainty and Implied Variance Bounds in Long-Memory Models of the Interest Rate Term Structure," Empirical Economics, Springer, vol. 16(3), pages 287-312.
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Terence Tai-Leung Chong, 2007. "Estimating the Fractionally Integrated Model with a Break in the Differencing Parameter," Economics Bulletin, Economics Bulletin, vol. 3(67), pages 1-10. [Downloadable!]
  2. Thabo Mokoena & Rangan Gupta & Renee Van Eyden, 2008. "Testing for Fractional Integration in SADC Real Exchange Rates," Working Papers 200811, University of Pretoria, Department of Economics. [Downloadable!]
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This page was last updated on 2008-11-19.

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