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Common dynamics in I(1) VAR systems

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Author Info

  • Paruolo Paolo

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

Abstract

This paper discusses common cycles in I(1) vector autoregressive (VAR) systems, both for the first di¤erences of the process and for deviations from equilibrium. This extension is based on the equilibrium dynamics representation of I(1) systems, which is presented in this paper. Inference on the number of common features is addressed via reduced rank regression, as well as estimation of the cofeature relations and specification testing. An empirical application on five US monthly macro and financial time series illustrates the techniques presented in the paper. We find one cointegrating relation and one cofeature vector in the equilibrium dynamics formulation, implying four common trends and four common cycles in the system.

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File URL: http://eco.uninsubria.it/dipeco/Quaderni/files/QF2003_35.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Insubria in its series Economics and Quantitative Methods with number qf0316.

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Length: 31 pages
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:ins:quaeco:qf0316

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Related research

Keywords: Common features; Cofeatures; Cointegration; Common trends; Common cycles; Common dynamics; Vector autoregressions; I(1); Reduced rank regression.;

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Cited by:
  1. Trenkler, Carsten & Weber, Enzo, 2012. "Identifying the Shocks behind Business Cycle Asynchrony in Euroland," University of Regensburg Working Papers in Business, Economics and Management Information Systems 466, University of Regensburg, Department of Economics.
  2. Luca Fanelli, 2009. "Estimation of quasi-rational DSGE monetary models," Quaderni di Dipartimento 3, Department of Statistics, University of Bologna.
  3. Luca Fanelli, 2006. "Testing the New Keynesian Phillips Curve through Vector Autoregressive models : Results from the Euro area," Quaderni di Dipartimento 0, Department of Statistics, University of Bologna.
  4. Gianluca Cubadda, 2007. "A Unifying Framework for Analysing Common Cyclical Features in Cointegrated Time Series," CEIS Research Paper 102, Tor Vergata University, CEIS.
  5. Franchi, Massimo & Paruolo, Paolo, 2011. "A characterization of vector autoregressive processes with common cyclical features," Journal of Econometrics, Elsevier, vol. 163(1), pages 105-117, July.
  6. Trenkler, Carsten & Weber, Enzo, 2012. "Codependent VAR Models and the Pseudo-Structural Form," University of Regensburg Working Papers in Business, Economics and Management Information Systems 465, University of Regensburg, Department of Economics.
  7. Paruolo, Paolo, 2006. "Common trends and cycles in I(2) VAR systems," Journal of Econometrics, Elsevier, vol. 132(1), pages 143-168, May.
  8. Fanelli, Luca, 2008. "Evaluating New Keynesian Phillips Curve under VAR-Based Learning," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(33), pages 1-24.

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