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The Rank of a Sub-Matrix of Cointegration

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  • Kurozumi, Eiji

Abstract

This paper proposes a test of the rank of the sub-matrix of b, where b is a cointegrating matrix. In addition, the sub-matrix of d, an orthogonal complement to b, is investigated. We show that information on the rank of the sub-matrix of b and/or d is useful in several situations. We construct the test statistic by using the eigenvalues of the quadratic form of the sub-matrix. We show that the test statistic has a limiting chi-squared distribution when the data is non-trending, and we propose a conservative test when the data is trending. Finite sample simulations show that, although the simulation settings are limited, the proposed test works well.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/16973/1/070econDP02-15.pdf
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Bibliographic Info

Paper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 2002-15.

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Length: 34 p.
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:hit:econdp:2002-15

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Cited by:
  1. Bertocco Giancarlo, 2006. "Are banks special? A note on Tobin’s theory of financial intermediaries," Economics and Quantitative Methods qf0605, Department of Economics, University of Insubria.
  2. Mauricio, Jose Alberto, 2006. "Exact maximum likelihood estimation of partially nonstationary vector ARMA models," Computational Statistics & Data Analysis, Elsevier, vol. 50(12), pages 3644-3662, August.
  3. Paolo Paruolo, 2006. "The Likelihood Ratio Test for the Rank of a Cointegration Submatrix," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(s1), pages 921-948, December.

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