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On the identification of fractionally cointegrated VAR models with the F(d) condition

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  • Federico Carlini

    ()
    (Aarhus University and CREATES)

  • Paolo Santucci de Magistris

    ()
    (Aarhus University and CREATES)

Abstract

This paper discusses identification problems in the fractionally cointegrated system of Johansen (2008) and Johansen and Nielsen (2012). The identification problem arises when the lag structure is over-specified, such that there exist several equivalent reparametrization of the model associated with different fractional integration and cointegration parameters. The properties of these multiple non-identified sub-models are studied and a necessary and sufficient condition for the identification of the fractional parameters of the system is provided. The condition is named F(d). The assessment of the F(d) condition in the empirical analysis is relevant for the determination of the fractional parameters as well as the lag structure.

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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2013-44.

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Length: 26
Date of creation: 12 Nov 2013
Date of revision:
Handle: RePEc:aah:create:2013-44

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Web page: http://www.econ.au.dk/afn/

Related research

Keywords: Fractional Cointegration; Cofractional Models; Identification; Lag;

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  1. Johansen, Søren & Nielsen, Morten Ørregaard, 2010. "Likelihood inference for a nonstationary fractional autoregressive model," Journal of Econometrics, Elsevier, vol. 158(1), pages 51-66, September.
  2. Søren Johansen & Morten Ørregaard Nielsen, 2010. "Likelihood inference for a fractionally cointegrated vector autoregressive model," Working Papers 1237, Queen's University, Department of Economics.
  3. Johansen, SØren, 2008. "A Representation Theory For A Class Of Vector Autoregressive Models For Fractional Processes," Econometric Theory, Cambridge University Press, vol. 24(03), pages 651-676, June.
  4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  5. Bent Jesper Christensen & Morten Ø. Nielsen, . "Semiparametric Analysis of Stationary Fractional Cointegration and the Implied-Realized Volatility Relation in High-Frequency Options Data," Economics Working Papers 2001-4, School of Economics and Management, University of Aarhus.
  6. Tschernig, Rolf & Weber, Enzo & Weigand, Roland, 2013. "Fractionally Integrated VAR Models with a Fractional Lag Operator and Deterministic Trends: Finite Sample Identification and Two-step Estimation," University of Regensburg Working Papers in Business, Economics and Management Information Systems 471, University of Regensburg, Department of Economics.
  7. 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.
  8. Nielsen, Morten Orregaard & Shimotsu, Katsumi, 2007. "Determining the cointegrating rank in nonstationary fractional systems by the exact local Whittle approach," Journal of Econometrics, Elsevier, vol. 141(2), pages 574-596, December.
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