Testing For The Cointegrating Rank Of A Var Process With An Intercept
AbstractTesting the cointegrating rank of a vector autoregressive process with an intercept is considered. In addition to the likelihood ratio (LR) tests developed by Johansen and Juselius (1990, Oxford Bulletin of Economics and Statistics, 52, 169 210) and others we also consider an alternative class of tests that is based on estimating the trend parameters of the deterministic term in a different way. The asymptotic local power of these tests is derived and compared to that of the corresponding LR tests. The small sample properties are investigated by simulations. The new tests are seen to be substantially more powerful than conventional LR tests.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Econometric Theory.
Volume (Year): 16 (2000)
Issue (Month): 03 (June)
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Other versions of this item:
- Saikkonen, Pentti & Lütkepohl, Helmut, 1998. "Testing for the cointegrating rank of a VAR process with an intercept," SFB 373 Discussion Papers 1998,51, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
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- Toda, Hiro Y., 1995. "Finite Sample Performance of Likelihood Ratio Tests for Cointegrating Ranks in Vector Autoregressions," Econometric Theory, Cambridge University Press, vol. 11(05), pages 1015-1032, October.
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"Determination of Cointegration Rank in the Presence of a Linear Trend,"
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Department of Economics, University of Oxford, vol. 54(3), pages 383-97, August.
- Johansen, S., 1991. "Determination of Cointegration Rank in the Presence of a Linear Trend," Papers 76a, Helsinki - Department of Economics.
- Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
- Hansen, Bruce E., 1992. "Convergence to Stochastic Integrals for Dependent Heterogeneous Processes," Econometric Theory, Cambridge University Press, vol. 8(04), pages 489-500, December.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
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