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Common dynamics in I(1) VAR systems

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  • 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. "Codependent VAR Models and the Pseudo-Structural Form," Working Papers 12-10, University of Mannheim, Department of Economics.
  2. Gianluca Cubadda, 2007. "A Unifying Framework for Analysing Common Cyclical Features in Cointegrated Time Series," CEIS Research Paper 102, Tor Vergata University, CEIS.
  3. Fanelli, Luca, 2005. "Testing the New Keynesian Phillips curve through Vector Autoregressive models: Results from the Euro area," MPRA Paper 1617, University Library of Munich, Germany, revised Jan 2007.
  4. 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.
  5. Luca Fanelli, 2009. "Estimation of quasi-rational DSGE monetary models," Quaderni di Dipartimento 3, Department of Statistics, University of Bologna.
  6. Trenkler, Carsten & Weber, Enzo, 2012. "Identifying the Shocks behind Business Cycle Asynchrony in Euroland," Working Papers 12-11, University of Mannheim, Department of Economics.
  7. Paruolo Paolo, 2003. "Common trends and cycles in I(2) VAR systems," Economics and Quantitative Methods qf0217bis, Department of Economics, University of Insubria.
  8. Luca Fanelli & Giulio Palomba, 2011. "Simulation‐based tests of forward‐looking models under VAR learning dynamics," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(5), pages 762-782, 08.
  9. Marcel Gorenflo, 2013. "Futures price dynamics of CO 2 emission allowances," Empirical Economics, Springer, vol. 45(3), pages 1025-1047, December.
  10. 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.
  11. Massimiliano Castellani & Luca Fanelli & Marco Savioli, 2013. "Government Fiscal Efforts vs. Labour Union Strikes: It Takes Two to Tango," Working Paper Series 33_13, The Rimini Centre for Economic Analysis, revised Jan 2014.

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