Gaussian Semi‐parametric Estimation of Fractional Cointegration

. We analyse consistent estimation of the memory parameters of a nonstationary fractionally cointegrated vector time series. Assuming that the cointegrating relationship has substantially less memory than the observed series, we show that a multi‐variate Gaussian semi‐parametric estimate, based on initial consistent estimates and possibly tapered observations, is asymptotically normal. The estimates of the memory parameters can rely either on original (for stationary errors) or on differenced residuals (for nonstationary errors) assuming only a convergence rate for a preliminary slope estimate. If this rate is fast enough, semi‐parametric memory estimates are not affected by the use of residuals and retain the same asymptotic distribution as if the true cointegrating relationship were known. Only local conditions on the spectral densities around zero frequency for linear processes are assumed. We concentrate on a bivariate system but discuss multi‐variate generalizations and show the performance of the estimates with simulated and real data.