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Testing Linear Restrictions On Cointegrating Vectors: Sizes And Powers Of Wald And Likelihood Ratio Tests In Finite Samples

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  • Haug, Alfred A.

Abstract

The Wald test for linear restrictions on cointegrating vectors is compared in finite samples using the Monte Carlo method. The Wald test is calculated within the vector error-correction based estimation methods of Bewley, Orden, Yang, and Fisher (1994, Journal of Econometrics 64, 3 27) and of Johansen (1991, Econometrica 59, 1551 1580), the canonical cointegration method of Park (1992, Econometrica 60, 119 143), the dynamic ordinary least squares method of Phillips and Loretan (1991, Review of Economic Studies 58, 407 436), Saikkonen (1991, Econometric Theory 7, 1 21), and Stock and Watson (1993, Econometrica 61, 783 820), the fully modified ordinary least squares method of Phillips and Hansen (1990, Review of Economic Studies 57, 99 125), and the band spectral techniques of Phillips (1991, in W. Barnett, J. Powell, G. E. Tauchen (eds.), Nonparametric and Semiparametric Methods in Economics and Statistics, pp. 413 435). The Wald test performance is also compared to that of the likelihood ratio test suggested by Johansen and Juselius (1990, Oxford Bulletin of Economics and Statistics 52, 169 210) and to a Bartlett correction of that test as proposed by Johansen (1998, A Small Sample Test for Tests of Hypotheses on Cointegrating Vectors, European University Institute).

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Bibliographic Info

Article provided by Cambridge University Press in its journal Econometric Theory.

Volume (Year): 18 (2002)
Issue (Month): 02 (April)
Pages: 505-524

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Handle: RePEc:cup:etheor:v:18:y:2002:i:02:p:505-524_18

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Cited by:
  1. Norman Morin, 2006. "Likelihood ratio tests on cointegrating vectors, disequilibrium adjustment vectors, and their orthogonal complements," Finance and Economics Discussion Series 2006-21, Board of Governors of the Federal Reserve System (U.S.).
  2. Hautsch, Nikolaus & Huang, Ruihong, 2012. "The market impact of a limit order," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 501-522.
  3. Beyer, Andreas & Haug, Alfred A. & Dewald, William G., 2009. "Structural breaks, cointegration and the Fisher effect," Working Paper Series 1013, European Central Bank.
  4. Eriksson , ├ůsa, 2004. "Testing Structural Hypotheses on Cointegration Vectors: A Monte Carlo Study," Working Papers 2004:29, Lund University, Department of Economics.
  5. Alfred A. Haug & Julie Tam, 2001. "A Closer Look at Long Run Money Demand," Working Papers 2002_09, York University, Department of Economics, revised Sep 2002.

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