Short-Run Parameter Changes in a Cointegrated Vector Autoregressive Model
AbstractThis paper addresses the question of whether a conventional approach to cointegration is applicaple to the case where changes are allowed in the parameters for the short term dynamics. We reparametrise a vector autoregressive model such that the short-run parameters exhibiting changes at known points are explicitly given. We then show that the likelihood ratio test statistic for cointegration rank is based on reduced rank regression and has the usual asymptotic distribution. An empirical illustration using US gasoline prices is presented.
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Bibliographic InfoPaper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2005-W01.
Length: 16 pages
Date of creation: 01 Jan 2005
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Web page: http://www.nuff.ox.ac.uk/economics/
Other versions of this item:
- Bent Nielsen & Takamitsu Kurita, 2004. "Short-run parameter changes in a cointegrated vector autoregressive model," Economics Series Working Papers 2005-W01, University of Oxford, Department of Economics.
- NEP-ALL-2005-03-06 (All new papers)
- NEP-ECM-2005-03-06 (Econometrics)
- NEP-ETS-2005-03-06 (Econometric Time Series)
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- Emerson Fernandes Marçal & Fernando Barbi, 2010. "“Quo Vadis Real? Estimating the Brazilian Real Exchange Rate Misalignment in Vector Error Correction Model with Structural Change”," Working Papers 10-2010, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
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