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Testing for the Cointegration Rank when Some Cointegrating Directions are Shifting

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  • Philippe Andrade

    (THEMA)

  • Catherine Bruneau

    (THEMA)

  • Stephane Gregoir

    (INSEE - CREST)

Abstract

In this paper we propose a multivariate analysis of a cointegrated vectorial autoregressive model with structural breaks affecting the cointegrating vectors. These changes are previously recognized using a single-equation methodology. Asymptotic properties of the breaks dates estimators allow us to implement a full information maximum likelihood analysis with the breaks identified considered as fixed. Thus, a VECM is estimated, providing a relevant framework to test for non-causality and neutrality tests, as well as impulse response analysis of the dynamics. The methodology is applied to the trivariate system analysed by Gregory and Hansen (1996), with a money variable, an interest rate and the output for the US over the 1960-1990 period.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1605.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1605

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  1. 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.
  2. Peter Reinhard Hansen, 2000. "Structural Breaks in the Cointegrated Vector Autoregressive Model," Econometric Society World Congress 2000 Contributed Papers 1240, Econometric Society.
  3. Shiller, Robert & Campbell, John, 1988. "Interpreting Cointegrated Models," Scholarly Articles 3221492, Harvard University Department of Economics.
  4. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  5. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
  6. Robert King & Mark W. Watson, 1992. "Testing Long Run Neutrality," NBER Working Papers 4156, National Bureau of Economic Research, Inc.
  7. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
  8. Allan w. Gregory & Bruce E. Hansen, 1992. "residual-Based Tests for Cointegration in Models with Regime Shifts," Working Papers 862, Queen's University, Department of Economics.
  9. Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
  10. Mellander, Erik & Vredin, A & Warne, A, 1992. "Stochastic Trends and Economic Fluctuations in a Small Open Economy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(4), pages 369-94, Oct.-Dec..
  11. Warne, A., 1993. "A Common Trends Model: Identification, Estimation and Inference," Papers 555, Stockholm - International Economic Studies.
  12. Hiro Y. Toda & Peter C.B. Phillips, 1991. "Vector Autoregression and Causality," Cowles Foundation Discussion Papers 977, Cowles Foundation for Research in Economics, Yale University.
  13. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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