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Local Power Of Likelihood Ratio Tests For The Cointegrating Rank Of A Var Process

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Author Info
Saikkonen, Pentti
L tkepohl, Helmut
Abstract

Likelihood ratio (LR) tests for the cointegrating rank of a vector autoregressive process have been developed under different assumptions regarding deterministic terms. For instance, nonzero mean terms and linear trends have been accounted for in some of the tests. In this paper we provide a general framework for deriving the local power properties of these tests. Thereby it is possible to assess the virtue of utilizing varying amounts of prior information by making assumptions regarding the deterministic terms. One interesting result from this analysis is that if no assumptions regarding the specific form of the mean term are made whereas a linear trend is excluded then a test is available that has the same local power as an LR test derived under a zero mean assumption.

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File URL: http://journals.cambridge.org/abstract_S026646669915103X
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Publisher Info
Article provided by Cambridge University Press in its journal Econometric Theory.

Volume (Year): 15 (1999)
Issue (Month): 01 (February)
Pages: 50-78
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:cup:etheor:v:15:y:1999:i:01:p:50-78_15

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  1. Deniz Dilan Karaman Örsal, 2007. "Comparison of Panel Cointegration Tests," SFB 649 Discussion Papers SFB649DP2007-029, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
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  2. Karel Mertens, 2006. "How the Removal of Deposit Rate Ceilings Has Changed Monetary Transmission in the US: Theory and Evidence," Economics Working Papers ECO2006/34, European University Institute. [Downloadable!]
  3. H. Lütkepohl & P. Saikkonen & C. Trenkler, . "Testing for the Cointegrating Rank of a VAR Process with Level Shift at Unknown Time," Sonderforschungsbereich 373 2001-63, Humboldt Universitaet Berlin.
    Other versions:
  4. Carsten Trenkler & Pentti Saikkonen & Helmut Luetkepohl, 2006. "Testing for the Cointegrating Rank of a VAR Process with Level Shift and Trend Break," Economics Working Papers ECO2006/29, European University Institute. [Downloadable!]
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  5. Matei Demetrescu & Helmut Luetkepohl & Pentti Saikkonen, 2008. "Testing for the Cointegrating Rank of a Vector Autoregressive Process with Uncertain Deterministic Trend Term," Economics Working Papers ECO2008/24, European University Institute. [Downloadable!]
  6. Eiji Kurozumi & Kazuhiko Hayakawa, 2006. "Asymptotic Properties of the Efficient Estimators for Cointegrating Regression Models with Serially Dependent Errors," Hi-Stat Discussion Paper Series d06-197, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  7. H. Lütkepohl & P. Saikkonen & C. Trenkler, . "Comparison of Tests for the Cointegrating Rank of a VAR Process with a Structural Shift," Sonderforschungsbereich 373 2000-10, Humboldt Universitaet Berlin.
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  8. Mototsugu Shintani, 2000. "A Simple Cointegrating Rank Test Without Vector Autoregression," Working Papers 0044, Department of Economics, Vanderbilt University. [Downloadable!]
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  9. Markku Lanne, 2000. "Near unit roots, cointegration, and the term structure of interest rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 513-529. [Downloadable!]
  10. H. Lütkepohl & P. Saikkonen & C. Trenkler, . "Maximum Eigenvalue Versus Trace Tests for the Cointegrating Rank of a VAR Process," Sonderforschungsbereich 373 2000-83, Humboldt Universitaet Berlin.
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  11. Ahlgren, Niklas & Antell, Jan, 2009. "The Power of Bootstrap Tests of Cointegration Rank with Financial Time Series," Working Papers 541, Hanken School of Economics. [Downloadable!]
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