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Cointegration Analysis in the Case of I(2) – General Overview

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  • Michał Majsterek

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    (University of Łódz, Chair of Econometric Models and Forecasts)

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    Abstract

    The presented paper aims to analyse both statistical and economic aspects of the model with I(2) variables. The statistical foundations of such models are introduced. The enlargement of possible statistical interpretation is discussed. The economic interpretation of both VECM parameters and common stochastic trends representation is considered in the I(2) domain. The returns of I(2) approach in terms of stock-flows, nominal-real analysis and diasggregation into both long-, short and even medium-run analysis are proved. Potential complications under reflecting I(3) variables are presented.

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    File URL: http://www.cejeme.eu/publishedarticles/2013-40-16-635043120482187500-6333.pdf
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    Bibliographic Info

    Article provided by CEJEME in its journal Central European Journal of Economic Modelling and Econometrics.

    Volume (Year): 4 (2012)
    Issue (Month): 4 (December)
    Pages: 215-252

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    Handle: RePEc:psc:journl:v:4:y:2012:i:4:p:215-252

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    Web page: http://cejeme.org/

    Related research

    Keywords: cointegration; I(2) model; VAR;

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    1. Haldrup, Niels, 1994. "The asymptotics of single-equation cointegration regressions with I(1) and I(2) variables," Journal of Econometrics, Elsevier, vol. 63(1), pages 153-181, July.
    2. Paruolo, Paolo, 1996. "On the determination of integration indices in I(2) systems," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 313-356.
    3. Renato Flôres & Ariane Szafarz, 1996. "An enlarged definition of cointegration," ULB Institutional Repository 2013/705, ULB -- Universite Libre de Bruxelles.
    4. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    5. 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.
    6. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    7. Rahbek, Anders & Christian Kongsted, Hans & Jorgensen, Clara, 1999. "Trend stationarity in the I(2) cointegration model," Journal of Econometrics, Elsevier, vol. 90(2), pages 265-289, June.
    8. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    9. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
    10. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107.
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