Tests Against Stationary and Explosive Alternatives in Vector Autoregressive Models
AbstractThe article proposes new tests for the number of unit roots in vector autoregressive models based on the eigenvalues of the companion matrix. Both stationary and explosive alternatives are considered. The limiting distributions of test statistics depend only on the number of unit roots. Size and power are investigated and it is found that the new test against stationary alternatives compares favorably with the widely used likelihood ratio test for the cointegrating rank. The powers are prominently higher against explosive than stationary alternatives. Some empirical examples are provided to show how to use the new tests with real data.
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Bibliographic InfoPaper provided by Hanken School of Economics in its series Working Papers with number 511.
Length: 38 pages
Date of creation: 14 Dec 2005
Date of revision:
Note: This paper is published as: Ahlgren, Niklas and Nyblom, Jukka (2008), 'Tests against Stationary and Explosive Alternatives in Vector Autoregressive Models', Journal of Time Series Analysis, 29, 421-443.
Contact details of provider:
Postal: Hanken School of Economics, Arkadiankatu 22, P.O.B. 479; FIN 00101 Helsinki, Finland
Phone: +358-9-431 331
Fax: +358-9-431 33 333
Web page: http://www.hanken.fi
More information through EDIRC
Asymptotic local power; Cointegration; Companion matrix; Unit root;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-01 (All new papers)
- NEP-ECM-2006-01-01 (Econometrics)
- NEP-ETS-2006-01-01 (Econometric Time Series)
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.:
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Nielsen, Bent, 2001.
"The Asymptotic Distribution of Unit Root Tests of Unstable Autoregressive Processes,"
Econometric Society, vol. 69(1), pages 211-19, January.
- Bent Nielsen, 1999. "The Asymptotic Distribution of Unit Root Tests of Unstable Autoregressive Processes," Economics Series Working Papers 1999-W19, University of Oxford, Department of Economics.
- Katarina Juselius & Zorica Mladenovic, 2002. "High Inflation, Hyperinflation and Explosive Roots: The Case of Yugoslavia," Discussion Papers 02-23, University of Copenhagen. Department of Economics.
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