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Bootstrapping and Bartlett corrections in the cointegrated VAR model

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  • Omtzigt Pieter

    ()
    (Department of Economics, University of Insubria, Italy)

  • Fachin Stefano

    ()
    (University of Sapienza, Rome, Italy)

Abstract

The small sample properties of tests on long-run coefficients in cointegrated systems are still a matter of concern to applied econometricians. We compare the performance of the Bartlett correction, the bootstrap and the fast double bootstrap for tests on cointegration parameters in the maximum likelihood framework. We show by means of a theorical result and simulations that all three procedures should be based on the unrestricted estimate of the cointegration vectors. The fast double bootstrap delivers superior size correction, whereas the Bartlett correction leads to the least loss of power. However all three perform much better than the asymptotic tests and difference between them are small.

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Bibliographic Info

Paper provided by Department of Economics, University of Insubria in its series Economics and Quantitative Methods with number qf0212.

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Length: 25 pages
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:ins:quaeco:qf0212

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  1. Bewley, Ronald & Orden, David & Yang, Minxian & Fisher, Lance A., 1994. "Comparison of Box--Tiao and Johansen canonical estimators of cointegrating vectors in VEC(1) models," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 3-27.
  2. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  3. Johansen, S., 1999. "A Bartlett Correction Factor for Tests on the Cointegrating Relations," Economics Working Papers eco99/10, European University Institute.
  4. Davidson, James, 2006. "Alternative bootstrap procedures for testing cointegration in fractionally integrated processes," Journal of Econometrics, Elsevier, vol. 133(2), pages 741-777, August.
  5. Karim Abadir & Kaddour Hadri & Elias Tzavalis, . "The Influence of VAR Dimensions on Estimator Biases," Discussion Papers 96/14, Department of Economics, University of York.
  6. Li, Hongyi & Maddala, G. S., 1997. "Bootstrapping cointegrating regressions," Journal of Econometrics, Elsevier, vol. 80(2), pages 297-318, October.
  7. Gredenhoff, Mikael & Jacobson, Tor, 2001. "Bootstrap Testing Linear Restrictions on Cointegrating Vectors," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 63-72, January.
  8. Jensen, J. L. & Wood, Andrew T. A., 1997. "On the non-existence of a Bartlett correction for unit root tests," Statistics & Probability Letters, Elsevier, vol. 35(2), pages 181-187, September.
  9. Chang, Yoosoon & Sickles, Robin & Song, Wonho, 2001. "Bootstrapping Unit Root Tests with Covariates," Working Papers 2001-07, Rice University, Department of Economics.
  10. Atsushi Inoue & Lutz Kilian, 2002. "Bootstrapping Autoregressive Processes with Possible Unit Roots," Econometrica, Econometric Society, vol. 70(1), pages 377-391, January.
  11. Haug, A.A., 1992. "Tests for Cointegration: A Monte Carlo Comparison," Papers 93-2, York (Canada) - Department of Economics.
  12. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  13. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  14. 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.
  15. Russell Davidson & James G. MacKinnon, 2000. "Improving the Reliability of Bootstrap Tests," Working Papers 995, Queen's University, Department of Economics.
  16. Jeremy Berkowitz & Lutz Kilian, 2000. "Recent developments in bootstrapping time series," Econometric Reviews, Taylor & Francis Journals, vol. 19(1), pages 1-48.
  17. Nielsen, B., 1995. "Bartlett Correction of the Unit Root test in Autoregressive Models," Economics Papers 98, Economics Group, Nuffield College, University of Oxford.
  18. Fachin, Stefano, 2000. " Bootstrap and Asymptotic Tests of Long-Run Relationships in Cointegrated Systems," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(4), pages 543-51, September.
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Citations

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Cited by:
  1. Stefano Fachin, 2005. "Long-Run Trends in Internal Migrations in Italy: a Study in Panel Cointegration with Dependent Units," Econometrics 0507002, EconWPA.
  2. Cubadda, Gianluca & Omtzigt, Pieter, 2003. "Small Sample Improvements in the Statistical Analysis of Seasonally Cointegrated Systems," Economics & Statistics Discussion Papers esdp03012, University of Molise, Dept. EGSeI.
  3. H. Peter Boswijk & Jurgen Doornik, 2003. "Identifying, Estimating and Testing Restricted Cointegrated Systems: An Overview," Economics Papers 2003-W10, Economics Group, Nuffield College, University of Oxford.
  4. Omtzigt Pieter, 2002. "Automatic identification and restriction of the cointegration space," Economics and Quantitative Methods qf0213, Department of Economics, University of Insubria.
  5. Russell Davidson & James G. MacKinnon, 2006. "Improving the Reliability of Bootstrap Tests with the Fast Double Bootstrap," Working Papers 1044, Queen's University, Department of Economics.
  6. Eriksson , ├ůsa, 2004. "Testing Structural Hypotheses on Cointegration Vectors: A Monte Carlo Study," Working Papers 2004:29, Lund University, Department of Economics.
  7. H. Peter Boswijk & Giuseppe Cavaliere & Anders Rahbek & A.M. Robert Taylor, 2013. "Inference on Co-integration Parameters in Heteroskedastic Vector Autoregressions," Discussion Papers 13-13, University of Copenhagen. Department of Economics.
  8. repec:ebl:ecbull:v:3:y:2004:i:13:p:1-8 is not listed on IDEAS
  9. Matteo Manera & Alessandro Cologni, 2005. "Oil Prices, Inflation and Interest Rates in a Structural Cointegrated VAR Model for the G-7 Countries," Working Papers 2005.101, Fondazione Eni Enrico Mattei.
  10. Alain W. HECQ, 2005. "Common Trends and Common Cycles in Latin America: A 2-step vs an Iterative Approach," Computing in Economics and Finance 2005 258, Society for Computational Economics.
  11. James G. MacKinnon, 2006. "Applications of the Fast Double Bootstrap," Working Papers 1023, Queen's University, Department of Economics.
  12. Roberto ESPOSTI, 2007. "On the Decline of Agriculture. Evidence from Italian Regions in the Post-WWII Period," Working Papers 300, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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