Practical Problems with Reduced Rank ML Estimators for Cointegration Parameters and a Simple Alternative
AbstractJohansen's reduced rank maximum likelihood (ML) estimator for cointegration parameters in vector error correction models is known to produce occasional extreme outliers. Using a small monetary system and German data we illustrate the practical importance of this problem. We also consider an alternative generalized least squares (GLS) system estimator which has better properties in this respect. The two estimators are compared in a small simulation study. It is found that the GLS estimator can indeed be an attractive alternative to ML estimation of cointegration parameters.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2004/20.
Date of creation: 2004
Date of revision:
Contact details of provider:
Postal: Badia Fiesolana, Via dei Roccettini, 9, 50016 San Domenico di Fiesole (FI) Italy
Web page: http://www.eui.eu/ECO/
More information through EDIRC
Vector autoregressive process; Vector error correction model; Cointegration; Reduced rank estimation; Maximum likelihood estimation;
Other versions of this item:
- Ralf Brüggemann & Helmut Lütkepohl, 2005. "Practical Problems with Reduced-rank ML Estimators for Cointegration Parameters and a Simple Alternative," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(5), pages 673-690, October.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-27 (All new papers)
- NEP-ECM-2004-06-27 (Econometrics)
- NEP-ETS-2004-06-27 (Econometric Time Series)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Korhonen, Iikka & Mehrotra, Aaron, 2007. "Money demand in post-crisis Russia: De-dollarisation and re-monetisation," BOFIT Discussion Papers 14/2007, Bank of Finland, Institute for Economies in Transition.
- Bruggemann, Ralf & Lutkepohl, Helmut & Saikkonen, Pentti, 2006.
"Residual autocorrelation testing for vector error correction models,"
Journal of Econometrics,
Elsevier, vol. 134(2), pages 579-604, October.
- Ralf BRUEGGEMANN & Helmut LUETKEPOHL & Pentti SAIKKONEN, 2004. "Residual Autocorrelation Testing for Vector Error Correction Models," Economics Working Papers ECO2004/08, European University Institute.
- Mehrotra, Aaron, 2006.
"Demand for money in transition: Evidence from China's disinflation,"
BOFIT Discussion Papers
10/2006, Bank of Finland, Institute for Economies in Transition.
- Aaron Mehrotra, 2008. "Demand for Money in Transition: Evidence from China’s Disinflation," International Advances in Economic Research, Springer, vol. 14(1), pages 36-47, February.
- Christian Dreger & Jürgen Wolters, 2010.
"M3 money demand and excess liquidity in the euro area,"
Springer, vol. 144(3), pages 459-472, September.
- Christian Dreger & Jürgen Wolters, 2008. "M3 Money Demand and Excess Liquidity in the Euro Area," Discussion Papers of DIW Berlin 795, DIW Berlin, German Institute for Economic Research.
- Christian Dreger & Jürgen Wolters, 2008. "M3 Money Demand and Excess Liquidity in the Euro Area," Working Paper / FINESS 7.1a, DIW Berlin, German Institute for Economic Research.
- Moonsoo Park & Yanhong H. Jin & David A. Bessler, 2008.
"The impacts of animal disease crises on the Korean meat market,"
International Association of Agricultural Economists, vol. 39(2), pages 183-195, 09.
- Park, Moon-Soo & Jin, Yanhong H. & Bessler, David A., 2008. "The Impacts of Animal Disease Crises on the Korean Meat Market," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6365, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Chauvin, V. & Damette, O., 2010. "Wealth effects: the French case," Working papers 276, Banque de France.
- Joerg Breitung & M. Hashem Pesaran, 2005.
"Unit Roots and Cointegration in Panels,"
CESifo Working Paper Series
1565, CESifo Group Munich.
- Breitung, J. & Pesaran, M.H., 2005. "Unit Roots and Cointegration in Panels," Cambridge Working Papers in Economics 0535, Faculty of Economics, University of Cambridge.
- Jörg Breitung & M. Hashem Pesaran, 2005. "Unit Roots and Cointegration in Panels," IEPR Working Papers 05.32, Institute of Economic Policy Research (IEPR).
- Breitung, Jörg & Pesaran, Mohammad Hashem, 2005. "Unit roots and cointegration in panels," Discussion Paper Series 1: Economic Studies 2005,42, Deutsche Bundesbank, Research Centre.
- Christian Dreger & Hans-Eggert Reimers, 2012.
"The long run relationship between private consumption and wealth: common and idiosyncratic effects,"
Portuguese Economic Journal,
Springer, vol. 11(1), pages 21-34, April.
- Dreger, Christian & Reimers, Hans-Eggert, 2011. "The long run relationship between private consumption and wealth: common and idiosyncratic effects," Discussion Papers 295, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
- Badi H. Baltagi & Zijun Wang, 2006.
"Testing for Cointegrating Rank via Model Selection: Evidence from 165 Data Sets,"
Center for Policy Research Working Papers
83, Center for Policy Research, Maxwell School, Syracuse University.
- Badi Baltagi & Zijun Wang, 2007. "Testing for Cointegrating Rank Via Model Selection: Evidence From 165 Data Sets," Empirical Economics, Springer, vol. 33(1), pages 41-49, July.
- Julián Ramajo Hernández(1) & Montserrat Ferré Carracedo(2), . "Testing For Long-Run Purchasing Power Parity In The Post Bretton Woods Era: Evidence From Old And New Tests," Working Papers 24-05 Classification-JEL , Instituto de Estudios Fiscales.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcia Gastaldo).
If references are entirely missing, you can add them using this form.