VAR Cointegration in VARMA Models
AbstractThe method for estimation and testing for cointegration put forward by Johansen assumes that the data are described by a vector autoregressive process. In this article we extend the data generating process to autoregressive moving average models without unit roots in the MA polynomial. We first extend some matrix algebraic relationships for I(1) processes and derive their implications for the structure theory of cointegration. Specifically we show that the cointegrating space is invariant to MA errors which have no unit roots in the MA polynomial. The above results permit to prove the robustness of the Johansen estimates of the cointegrating space in a Gaussian vector autoregressive framework when the true model is vector autoregressive moving average, without unit roots in the MA polynomial. The small sample properties of the theoretical results are examined through a small simulation study.
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Bibliographic InfoPaper provided by Institute for Advanced Studies in its series Economics Series with number 65.
Length: 37 pages
Date of creation: May 1999
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Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
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