This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Analysis of panel vector error correction models using maximum likelihood, the bootstrap, and canonical-correlation estimators

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Richard G. Anderson
Hailong Qian
Robert H. Rasche

Additional information is available for the following registered author(s):

Abstract

In this paper, we examine the use of Box-Tiao*s (1977) canonical correlation method as an alternative to likelihood-based inferences for vector error-correction models. It is now well-known that testing of cointegration ranks based on Johansen*s (1995) ML-based method suffers from severe small sample size distortions. Furthermore, the distributions of empirical economic and financial time series tend to display fat tails, heteroskedasticity and skewness that are inconsistent with the usual distributional assumptions of likelihood-based approach. The testing statistic based on Box-Tiao*s canonical correlations shows promise as an alternative to Johansen*s ML-based approach for testing of cointegration rank in VECM models.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.

File URL: http://research.stlouisfed.org/wp/2006/2006-050.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2006-050.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:fip:fedlwp:2006-050

Contact details of provider:
Postal: P.O. Box 442, St. Louis, MO 63166
Fax: (314)444-8753
Web page: http://www.stlouisfed.org/
More information through EDIRC

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: (Diane Rosenberger).

Related research
Keywords: Econometric models ; Panel analysis;

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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. O'Connell, Paul G. J., 1998. "The overvaluation of purchasing power parity," Journal of International Economics, Elsevier, vol. 44(1), pages 1-19, February. [Downloadable!] (restricted)
  2. Michael Binder, Cheng Hsiao, and M. Hashem Pesaran, 2001. "Estimation and Inference in Short Panel Vector Autoregressions with Unit Roots and Cointegration," Computing in Economics and Finance 2001 36, Society for Computational Economics. [Downloadable!]
    Other versions:
  3. Peter C.B. Phillips & Hyungsik R. Moon, 1999. "Nonstationary Panel Data Analysis: An Overview of Some Recent Developments," Cowles Foundation Discussion Papers 1221, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  4. Gonzalo, Jesus & Pitarakis, Jean-Yves, 1998. "Specification via model selection in vector error correction models," Economics Letters, Elsevier, vol. 60(3), pages 321-328, September. [Downloadable!] (restricted)
  5. Larsson, Rolf & Lyhagen, Johan & Löthgren, Mickael, 1998. "Likelihood-Based Cointegration Tests in Heterogeneous Panels," Working Paper Series in Economics and Finance 250, Stockholm School of Economics, revised 27 Aug 1998.
    Other versions:
  6. Banerjee, Anindya, 1999. " Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 607-29, Special I. [Downloadable!] (restricted)
  7. Larsson, Rolf & Lyhagen, Johan, 1999. "Likelihood-Based Inference in Multivariate Panel Cointegration Models," Working Paper Series in Economics and Finance 331, Stockholm School of Economics. [Downloadable!]
    Other versions:
  8. Eriksson , Åsa, 2004. "Testing Structural Hypotheses on Cointegration Vectors: A Monte Carlo Study," Working Papers 2004:29, Lund University, Department of Economics. [Downloadable!]
  9. Phillips, P C B, 1991. "Optimal Inference in Cointegrated Systems," Econometrica, Econometric Society, vol. 59(2), pages 283-306, March. [Downloadable!] (restricted)
    Other versions:
  10. Bewley, R. & Orden, D. & Fisher, L., 1991. "Box TIAO and Johansen Canonical Estimators of Cointegrating Vectors," Papers 91-5, New South Wales - School of Economics.
  11. repec:cup:etheor:v:13:y:1997:i:4:p:529-57 is not listed on IDEAS
  12. Anindya Banerjee & Massimiliano Marcellino & Chiara Osbat, . "Some Cautions on the Use of Panel Methods for Integrated Series of Macro-Economic Data," Working Papers 170, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
    Other versions:
  13. repec:cup:etheor:v:10:y:1994:i:1:p:95-115 is not listed on IDEAS
  14. Flores, Renato & Jorion, Philippe & Preumont, Pierre-Yves & Szafarz, Ariane, 1999. "Multivariate unit root tests of the PPP hypothesis," Journal of Empirical Finance, Elsevier, vol. 6(4), pages 335-353, October. [Downloadable!] (restricted)
    Other versions:
  15. Harris, David, 1997. "Principal Components Analysis of Cointegrated Time Series," Econometric Theory, Cambridge University Press, vol. 13(04), pages 529-557, August. [Downloadable!]
  16. Haug, Alfred A., 1996. "Tests for cointegration a Monte Carlo comparison," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 89-115. [Downloadable!] (restricted)
  17. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May. [Downloadable!] (restricted)
  18. Taylor, Mark P. & Sarno, Lucio, 1998. "The behavior of real exchange rates during the post-Bretton Woods period," Journal of International Economics, Elsevier, vol. 46(2), pages 281-312, December. [Downloadable!] (restricted)
    Other versions:
  19. Phillips, Peter C B, 1995. "Fully Modified Least Squares and Vector Autoregression," Econometrica, Econometric Society, vol. 63(5), pages 1023-78, September. [Downloadable!] (restricted)
    Other versions:
  20. Aznar, Antonio & Salvador, Manuel, 2002. "Selecting The Rank Of The Cointegration Space And The Form Of The Intercept Using An Information Criterion," Econometric Theory, Cambridge University Press, vol. 18(04), pages 926-947, August. [Downloadable!]
  21. Ng, Serena & Perron, Pierre, 1997. "Estimation and inference in nearly unbalanced nearly cointegrated systems," Journal of Econometrics, Elsevier, vol. 79(1), pages 53-81, July. [Downloadable!] (restricted)
    Other versions:
  22. Westerlund, Joakim, 2005. "New Simple Tests for Panel Cointegration," Working Papers 2005:8, Lund University, Department of Economics.
  23. Westerlund, Joakim & Edgerton , David, 2005. "Panel Cointegration Tests with Deterministic Trends and Structural Breaks," Working Papers 2005:42, Lund University, Department of Economics. [Downloadable!]
  24. Shin, Yongcheol, 1994. "A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration," Econometric Theory, Cambridge University Press, vol. 10(01), pages 91-115, March. [Downloadable!]
  25. Badi H. Baltagi & Chihwa Kao, 2000. "Nonstationary Panels, Cointegration in Panels and Dynamic Panels: A Survey," Center for Policy Research Working Papers 16, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
  26. Lyhagen, Johan, 2000. "Why not use standard panel unit root test for testing PPP," Working Paper Series in Economics and Finance 413, Stockholm School of Economics. [Downloadable!]
    Other versions:
  27. Karlsson, Sune & Lothgren, Mickael, 2000. "On the power and interpretation of panel unit root tests," Economics Letters, Elsevier, vol. 66(3), pages 249-255, March. [Downloadable!] (restricted)
    Other versions:
  28. Michael Binder & Cheng Hsiao & M. Hashem Pesaran, 2000. "Estimation and Inference in Short Panel Vector Autoregressions with Unit Roots and Cointegration," Banco de España Working Papers 0005, Banco de España.
  29. Goncalves, Silvia & White, Halbert, 2004. "Maximum likelihood and the bootstrap for nonlinear dynamic models," Journal of Econometrics, Elsevier, vol. 119(1), pages 199-219, March. [Downloadable!] (restricted)
    Other versions:
  30. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
    Other versions:
  31. M Pesaran & Yongcheol Shin & Ron P Smith, 2004. "Pooled mean group estimation of dynamic heterogeneous panels," ESE Discussion Papers 16, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
Full references

Statistics
Access and download statistics

Did you know? A few items listed on IDEAS are over 2000 years old!

This page was last updated on 2009-10-30.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.