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Testing autocorrelation in a system perspective testing autocorrelation

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  • David Edgerton
  • Ghazi Shukur

Abstract

The Breusch-Godfrey test for autocorrelated errors is generalised to cover systems of equations, and the properties of 18 versions of the test are studied using Monte Carlo methods. We show that only one group of tests regularly has actual size close to the nominal size; namely the likelihood ratio tests of the auxiliary regression system that are corrected in some manner for degrees-of-freedom. The Rao Ftest exhibits the best performance, whilst the commonly used TR2 test behaves badly even in single equations. However, the size and power properties of all tests deteriorate sharply as the number of equations increases, the system becomes more dynamic, the exogenous variables become more autocorrelated and the sample size decreases. This performance has, in general, an unknown degree since the interaction amongst these factors does not permit a predictive summary, as might be hoped for by response surface-type approaches.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Econometric Reviews.

Volume (Year): 18 (1999)
Issue (Month): 4 ()
Pages: 343-386

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Handle: RePEc:taf:emetrv:v:18:y:1999:i:4:p:343-386

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Cited by:
  1. Bruggemann, Ralf & Lutkepohl, Helmut & Saikkonen, Pentti, 2006. "Residual autocorrelation testing for vector error correction models," Journal of Econometrics, Elsevier, vol. 134(2), pages 579-604, October.
  2. Mantalos, Panagiotis & Shukur, Ghazi, 2008. "Bootstrap methods for autocorrelation test with uncorrelated but not independent errors," Economic Modelling, Elsevier, vol. 25(5), pages 1040-1050, September.
  3. Bernhard Pfaff, . "VAR, SVAR and SVEC Models: Implementation Within R Package vars," Journal of Statistical Software, American Statistical Association, vol. 27(i04).
  4. Erdenebat Bataa & Dong H. Kim & Denise R. Osborn, 2007. "Expectations Hypothesis Tests in the Presence of Model Uncertainty," Discussion Paper Series 0703, Institute of Economic Research, Korea University.
  5. He, Changli & Teräsvirta, Timo & González, Andres, 2002. "Testing parameter constancy in stationary vector autoregressive models against continuous change," Working Paper Series in Economics and Finance 507, Stockholm School of Economics, revised 06 May 2004.
  6. Hatemi-J, Abdulnasser, 2004. "Multivariate tests for autocorrelation in the stable and unstable VAR models," Economic Modelling, Elsevier, vol. 21(4), pages 661-683, July.
  7. repec:dgr:uvatin:0000032 is not listed on IDEAS
  8. P.D. Koellinger & A.R. Thurik, 0000. "Entrepreneurship and the Business Cycle," Tinbergen Institute Discussion Papers 09-032/3, Tinbergen Institute, revised 30 Sep 2009.
  9. Schreiber, Sven, 2008. "Did work-sharing work in France? Evidence from a structural co-integrated VAR model," European Journal of Political Economy, Elsevier, vol. 24(2), pages 478-490, June.
  10. Wilmar Cabrera & Javier Gutiérrez Rueda & Juan Carlos Mendoza, . "Credit Risk Stress Testing: An Exercise for Colombian Banks," Temas de Estabilidad Financiera 073, Banco de la Republica de Colombia.
  11. Hacker, Scott & Kim, Hyunjoo & Månsson, Kristofer, 2010. "An Investigation of the Causal Relations between Exchange Rates and Interest Rate Differentials Using Wavelets," Working Paper Series in Economics and Institutions of Innovation 215, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  12. Helmut Luetkepohl, 2007. "Econometric Analysis with Vector Autoregressive Models," Economics Working Papers ECO2007/11, European University Institute.
  13. Elger, Thomas, 2002. "The Demand for Monetary Assets in the UK; a Locally Flexible Demand System Analysis," Working Papers 2002:6, Lund University, Department of Economics.
  14. Skuterud, Mikal, 2005. "The impact of Sunday shopping on employment and hours of work in the retail industry: Evidence from Canada," European Economic Review, Elsevier, vol. 49(8), pages 1953-1978, November.
  15. Mylonidis, Nikolaos & Paleologou, Suzanna-Maria, 2011. "The real uncovered interest parity: The case of Canada and the USA," Journal of Policy Modeling, Elsevier, vol. 33(2), pages 255-267, March.
  16. Almasri, Abdullah & Månsson, Kristofer & Sjölander, Pär & Shukur, Ghazi, 2012. "Testing for Panel Unit Roots in the Presence of an Unknown Structural Break and Cross-Sectional Dependency," HUI Working Papers 63, HUI Research.
  17. Shakir Hussain & Ghazi Shukur, 2003. "Testing for autocorrelation in non-stationary dynamic systems of equations," Journal of Applied Statistics, Taylor & Francis Journals, vol. 30(4), pages 441-454.

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