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Making wald tests work for cointegrated VAR systems

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Author Info
Juan Dolado
Helmut Lütkepohl

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Abstract

Wald tests of restrictions on the coefficients of vector autoregressive (VAR) processes are known to have nonstandard asymptotic properties for 1(1) and cointegrated systems of variables. A simple device is proposed which guarantees that Wald tests have asymptotic X2-distributions under general conditions. If the true generation process is a VAR(p) it is proposed to fit a VAR(p+l) to the data and perform a Wald test on the coefficients of the first p lags only. The power properties of the modified tests are studied both analytically and numerically by means of simple illustrative examples.

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File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/07474939608800362&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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Publisher Info
Article provided by Taylor and Francis Journals in its journal Econometric Reviews.

Volume (Year): 15 (1996)
Issue (Month): 4 ()
Pages: 369-386
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Handle: RePEc:taf:emetrv:v:15:y:1996:i:4:p:369-386

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Toda, Hiro Y & Phillips, Peter C B, 1993. "Vector Autoregressions and Causality," Econometrica, Econometric Society, vol. 61(6), pages 1367-93, November. [Downloadable!] (restricted)
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  2. Peter C.B. Phillips & Joon Y. Park, 1986. "Statistical Inference in Regressions with Integrated Processes: Part 2," Cowles Foundation Discussion Papers 819R, Cowles Foundation, Yale University, revised Feb 1987. [Downloadable!]
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  3. 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. [Downloadable!] (restricted)
  4. Ohanian, Lee E., 1988. "The spurious effects of unit roots on vector autoregressions : A Monte Carlo study," Journal of Econometrics, Elsevier, vol. 39(3), pages 251-266, November. [Downloadable!] (restricted)
  5. repec:cup:etheor:v:9:y:1993:i:2:p:263-82 is not listed on IDEAS
  6. Banerjee, Anindya & Dolado, Juan, 1988. "Tests of the Life Cycle-Permanent Income Hypothesis in the Presence of Random Walks: Asymptotic Theory and Small-Sample Interpretations," Oxford Economic Papers, Oxford University Press, vol. 40(4), pages 610-33, December. [Downloadable!] (restricted)
  7. Choi, In, 1993. "Asymptotic Normality of the Least-Squares Estimates for Higher Order Autoregressive Integrated Processes with Some Applications," Econometric Theory, Cambridge University Press, vol. 9(02), pages 263-282, April. [Downloadable!]
  8. 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. [Downloadable!] (restricted)
  9. Toda, Hiro Y. & Phillips, Peter C. B., 1993. "The spurious effect of unit roots on vector autoregressions : An analytical study," Journal of Econometrics, Elsevier, vol. 59(3), pages 229-255, October. [Downloadable!] (restricted)
  10. Mizon, Grayham E & Hendry, David F, 1980. "An Empirical Application and Monte Carlo Analysis of Tests of Dynamic Specification," Review of Economic Studies, Blackwell Publishing, vol. 47(1), pages 21-45, January. [Downloadable!] (restricted)
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