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Residual Autocorrelation Testing for Vector Error Correction Models

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Author Info
Ralf BRUEGGEMANN
Helmut LUETKEPOHL
Pentti SAIKKONEN

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Abstract

In applied time series analysis, checking for autocorrelation in a fitted model is a routine diagnostic tool. Therefore it is useful to know the asymptotic and small sample properties of the standard tests for the case when some of the variables are cointegrated. The properties of residual autocorrelations of vector error correction models (VECMs) and tests for residual autocorrelation are derived. In particular, the asymptotic distributions of Lagrange multiplier (LM) and portmanteau tests are given. Monte Carlo simulations show that the LM tests have advantages if autocorrelation of small order is tested whereas portmanteau tests are preferable for higher order residual autocorrelation. Their critical values have to be adjusted for the cointegration rank of the system, however.

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Paper provided by European University Institute in its series Economics Working Papers with number ECO2004/08.

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Date of creation: 2004
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Handle: RePEc:eui:euiwps:eco2004/08

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Related research
Keywords: cointegration; dynamic econometric models; vector autoregressions; vector error correction models; residual autocorrelation;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Saikkonen, Pentti, 2001. "Consistent Estimation In Cointegrated Vector Autoregressive Models With Nonlinear Time Trends In Cointegrating Relations," Econometric Theory, Cambridge University Press, vol. 17(02), pages 296-326, April. [Downloadable!]
  2. 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. [Downloadable!] (restricted)
  3. Saikkonen, Pentti, 2001. "Statistical Inference In Cointegrated Vector Autoregressive Models With Nonlinear Time Trends In Cointegrating Relations," Econometric Theory, Cambridge University Press, vol. 17(02), pages 327-356, April. [Downloadable!]
  4. Mizon, Grayham E & Hendry, David F, 1980. "An Empirical Application and Monte Carlo Analysis of Tests of Dynamic Specification," Review of Economic Studies, Blackwell Publishing, vol. 47(1), pages 21-45, January. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ida Wolden Bache, 2006. "Assessing the structural VAR approach to exchange rate pass-through," Computing in Economics and Finance 2006 309, Society for Computational Economics. [Downloadable!]
  2. Ralf Brueggemann & Helmut Luetkepohl, 2004. "A Small Monetary System for the Euro Area Based on German Data," Economics Working Papers ECO2004/24, European University Institute. [Downloadable!]
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