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Bias correcting adjustment coefficients in a cointegrated VAR with known cointegrating vectors

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  • Kees Jan van Garderen
  • H. Peter Boswijk

Abstract

The maximum likelihood estimator of the adjustment coefficient in a cointegrated vector autoregressive model (CVAR) is generally biased. For the case where the cointegrating vector is known in a first-order CVAR with no intercept, we derive a condition for the unbiasedness of the maximum likelihood estimator of the adjustment coefficients, and provide a simple characterization of the bias in case this condition is violated. A feasible bias correction method is shown to virtually eliminate the bias over a large part of the parameter space.

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Bibliographic Info

Paper provided by Universiteit van Amsterdam, Dept. of Econometrics in its series UvA-Econometrics Working Papers with number 13-05.

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Date of creation: 04 Jun 2013
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Handle: RePEc:ame:wpaper:1305

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Postal: Dept. of Econometrics, Universiteit van Amsterdam, Valckenierstraat 65, NL - 1018 XE Amsterdam, The Netherlands
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Web page: http://www.ase.uva.nl/uva-econometrics
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  1. Jan R. MAGNUS, 1986. "The Exact Moments of a Ratio of Quadratic Forms in Normal Variables," Annales d'Economie et de Statistique, ENSAE, issue 4, pages 95-109.
  2. Karim Abadir & Kaddour Hadri & Elias Tzavalis, . "The Influence of VAR Dimensions on Estimator Biases," Discussion Papers 96/14, Department of Economics, University of York.
  3. Magnus, J.R., 1986. "The exact moments of a ratio of quadratic forms in normal variables," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153219, Tilburg University.
  4. van GARDEREN, Kees Jan, 1997. "Exact geometry of explosive autoregressive models," CORE Discussion Papers 1997068, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. repec:fth:louvco:9768 is not listed on IDEAS
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