Advanced Search
MyIDEAS: Login

Optimal Residual-Based Tests for Fractional Cointegration and Exchange Rate Dynamics

Contents:

Author Info

  • Nielsen M.O.

Abstract

We propose a Lagrange Multiplier (LM) test of the null hypothesis of cointegration in fractionally cointegrated models. The test statistic utilizes fully modified residuals to cancel the endogeneity and serial correlation biases, and we show that standard asymptotics apply. With i.i.d. Gaussian errors the asymptotic Gaussian power envelope of all invariant (invariant and unbiased) tests is achieved by the one-sided (two-sided) test. The finite sample properties are illustrated by a Monte Carlo study. In an application to the dynamics among exchange rates for seven major currencies against the US dollar some evidence of the existence of a cointegrating relation is found.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ingentaconnect.com/content/asa/jbes/2004/00000022/00000003/art00007
File Function: full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 22 (2004)
Issue (Month): (July)
Pages: 331-345

as in new window
Handle: RePEc:bes:jnlbes:v:22:y:2004:p:331-345

Contact details of provider:
Web page: http://www.amstat.org/publications/jbes/index.cfm?fuseaction=main

Order Information:
Web: http://www.amstat.org/publications/index.html

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  2. Francis X. Diebold & Javier Gardeazabal & Kamil Yilmaz, 1993. "On cointegration and exchange rate dynamics," Working Papers 93-2, Federal Reserve Bank of Philadelphia.
  3. Lobato, Ignacio N & Velasco, Carlos, 2000. "Long Memory in Stock-Market Trading Volume," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(4), pages 410-27, October.
  4. D Marinucci & Peter M. Robinson, 2001. "Semiparametric fractional cointegration analysis," LSE Research Online Documents on Economics 2269, London School of Economics and Political Science, LSE Library.
  5. Cheung, Yin-Wong & Lai, Kon S, 1993. "A Fractional Cointegration Analysis of Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 103-12, January.
  6. Tanaka, Katsuto, 1999. "The Nonstationary Fractional Unit Root," Econometric Theory, Cambridge University Press, vol. 15(04), pages 549-582, August.
  7. Saikkonen, Pentti, 1991. "Asymptotically Efficient Estimation of Cointegration Regressions," Econometric Theory, Cambridge University Press, vol. 7(01), pages 1-21, March.
  8. Diebold, Francis X. & Rudebusch, Glenn D., 1989. "Long memory and persistence in aggregate output," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 189-209, September.
  9. Robinson, P. M., 1991. "Testing for strong serial correlation and dynamic conditional heteroskedasticity in multiple regression," Journal of Econometrics, Elsevier, vol. 47(1), pages 67-84, January.
  10. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  11. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
  12. Jansson, Michael, 2005. "Point optimal tests of the null hypothesis of cointegration," Journal of Econometrics, Elsevier, vol. 124(1), pages 187-201, January.
  13. Jansson, Michael & Haldrup, Niels, 2002. "Regression Theory For Nearly Cointegrated Time Series," Econometric Theory, Cambridge University Press, vol. 18(06), pages 1309-1335, December.
  14. Phillips, P C B, 1991. "Optimal Inference in Cointegrated Systems," Econometrica, Econometric Society, vol. 59(2), pages 283-306, March.
  15. Nielsen, Morten rregaard, 2004. "Efficient Likelihood Inference In Nonstationary Univariate Models," Econometric Theory, Cambridge University Press, vol. 20(01), pages 116-146, February.
  16. Marinucci, D. & Robinson, P. M., 2001. "Semiparametric fractional cointegration analysis," Journal of Econometrics, Elsevier, vol. 105(1), pages 225-247, November.
  17. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
  18. Peter C.B. Phillips & Mico Loretan, 1989. "Estimating Long Run Economic Equilibria," Cowles Foundation Discussion Papers 928, Cowles Foundation for Research in Economics, Yale University.
  19. repec:cup:etheor:v:7:y:1991:i:1:p:1-21 is not listed on IDEAS
  20. Peter C.B. Phillips & Bruce E. Hansen, 1988. "Statistical Inference in Instrumental Variables," Cowles Foundation Discussion Papers 869R, Cowles Foundation for Research in Economics, Yale University, revised Apr 1989.
  21. Baillie, Richard T & Bollerslev, Tim, 1989. " Common Stochastic Trends in a System of Exchange Rates," Journal of Finance, American Finance Association, vol. 44(1), pages 167-81, March.
  22. Jeganathan, P., 1999. "On Asymptotic Inference In Cointegrated Time Series With Fractionally Integrated Errors," Econometric Theory, Cambridge University Press, vol. 15(04), pages 583-621, August.
  23. 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.
  24. Michael Dueker & Richard Startz, 1998. "Maximum-Likelihood Estimation Of Fractional Cointegration With An Application To U.S. And Canadian Bond Rates," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 420-426, August.
  25. Shin, Yongcheol, 1994. "A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration," Econometric Theory, Cambridge University Press, vol. 10(01), pages 91-115, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Frank S. Nielsen, 2009. "Local Whittle estimation of multivariate fractionally integrated processes," CREATES Research Papers 2009-38, School of Economics and Management, University of Aarhus.
  2. Katsumi Shimotsu & Morten Ørregaard Nielsen, 2006. "Determining the Cointegrating Rank in Nonstationary Fractional Systems by the Exact Local Whittle Approach," Working Papers 1029, Queen's University, Department of Economics.
  3. Katarzyna Lasak & Carlos Velasco, 2014. "Fractional Cointegration Rank Estimation," Tinbergen Institute Discussion Papers 14-021/III, Tinbergen Institute.
  4. Avarucci, Marco & Velasco, Carlos, 2009. "A Wald test for the cointegration rank in nonstationary fractional systems," Journal of Econometrics, Elsevier, vol. 151(2), pages 178-189, August.
  5. Banerjee, Anindya & Urga, Giovanni, 2005. "Modelling structural breaks, long memory and stock market volatility: an overview," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 1-34.
  6. Mauro Costantini & Roy Cerqueti, 2007. "Non parametric Fractional Cointegration Analysis," ISAE Working Papers 78, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  7. Marcel Aloy & Gilles De Truchis, 2012. "Estimation and Testing for Fractional Cointegration," Working Papers halshs-00793206, HAL.
  8. Cheng, Xu & Phillips, Peter C.B., 2012. "Cointegrating rank selection in models with time-varying variance," Journal of Econometrics, Elsevier, vol. 169(2), pages 155-165.
  9. Bent Jesper Christensen & Robinson Kruse & Philipp Sibbertsen, 2013. "A unified framework for testing in the linear regression model under unknown order of fractional integration," CREATES Research Papers 2013-35, School of Economics and Management, University of Aarhus.
  10. Morten Orregaard Nielsen, 2004. "Efficient inference in multivariate fractionally integrated time series models," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 63-97, 06.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bes:jnlbes:v:22:y:2004:p:331-345. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.