Testing for Codependence of Non-Stationary Variables
AbstractWe analyze non-stationary time series that do not only trend together in the long run, but restore the equilibrium immediately in the period following a deviation. While this represents a common serial correlation feature, the framework is extended to codependence, allowing for delayed adjustment. We show which restrictions are implied for VECMs and lay out a likelihood ratio test. In addition, due to identification problems in codependent VECMs a GMM test approach is proposed. We apply the concept to US and European interest rate data, examining the capability of the Fed and ECB to control overnight money market rates.
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Bibliographic InfoPaper provided by University of Regensburg, Department of Economics in its series University of Regensburg Working Papers in Business, Economics and Management Information Systems with number 446.
Date of creation: 15 Sep 2010
Date of revision:
Serial correlation common features; codependence; cointegration; overnight interest rates; central banks;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-ECM-2010-09-25 (Econometrics)
- NEP-ETS-2010-09-25 (Econometric Time Series)
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- Trenkler, Carsten & Weber, Enzo, 2012.
"Codependent VAR Models and the Pseudo-Structural Form,"
12-10, University of Mannheim, Department of Economics.
- Carsten Trenkler & Enzo Weber, 2013. "Codependent VAR models and the pseudo-structural form," AStA Advances in Statistical Analysis, Springer, vol. 97(3), pages 287-295, July.
- Trenkler, Carsten & Weber, Enzo, 2012. "Codependent VAR Models and the Pseudo-Structural Form," University of Regensburg Working Papers in Business, Economics and Management Information Systems 465, University of Regensburg, Department of Economics.
- Trenkler, Carsten & Weber, Enzo, 2012.
"Identifying the Shocks behind Business Cycle Asynchrony in Euroland,"
12-11, University of Mannheim, Department of Economics.
- Trenkler, Carsten & Weber, Enzo, 2012. "Identifying the Shocks behind Business Cycle Asynchrony in Euroland," University of Regensburg Working Papers in Business, Economics and Management Information Systems 466, University of Regensburg, Department of Economics.
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