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Analysis of co-explosive processes

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Abstract

A vector autoregressive model allowing for unit roots as well as explosive characteristic roots is developed. The Granger-Johansen representation shows that this results in processes with two common features: a random walk and an explosively growing process. Co-integrating and co-explosive vectors can be found which eliminate these common factors. Likelihood ratio tests for linear restrictions on the co-explosive vectors are derived. As an empirical illustration the method is applied to data from the extreme Yugoslavian hyper-inflation of the 1990s.

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File URL: http://www.nuffield.ox.ac.uk/economics/papers/2005/w8/explosive.pdf
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2005-W08.

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Length: 36 pages
Date of creation: 30 Mar 2005
Date of revision:
Handle: RePEc:nuf:econwp:0508

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Web page: http://www.nuff.ox.ac.uk/economics/

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Keywords: Asymptotic normality; Co-explosiveness; Cointegration; Explosive processes; Hyper-inflation; Likelihood ratio tests; Vector autoregression;

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References

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  1. Johansen, S. & Schaumburg, E., 1997. "Likelihood Analysis of Seasonal Cointegration," Economics Working Papers, European University Institute eco97/16, European University Institute.
  2. Bent Nielsen, 2004. "On the Distribution of Likelihood Ratio Test Statistics for Cointegration Rank," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 23(1), pages 1-23.
  3. Bent Nielsen, 1999. "The Asymptotic Distribution of Unit Root Tests of Unstable Autoregressive Processes," Economics Series Working Papers, University of Oxford, Department of Economics 1999-W19, University of Oxford, Department of Economics.
  4. Bent Nielsen, 2003. "Correlograms for non-stationary autoregressions," Economics Series Working Papers, University of Oxford, Department of Economics 2003-W11, University of Oxford, Department of Economics.
  5. Taylor, Mark P, 1990. "The Hyperinflation Model of Money Demand Revisited," CEPR Discussion Papers, C.E.P.R. Discussion Papers 473, C.E.P.R. Discussion Papers.
  6. Bent Nielsen, 2001. "Order determination in general vector autoregressions," Economics Papers, Economics Group, Nuffield College, University of Oxford 2001-W10, Economics Group, Nuffield College, University of Oxford.
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Citations

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Cited by:
  1. Bjørnar Karlsen Kivedal, 2012. "Testing for rational bubbles in the housing market," Working Paper Series, Department of Economics, Norwegian University of Science and Technology 13312, Department of Economics, Norwegian University of Science and Technology.
  2. B. Nielsen, 2009. "Test for cointegration rank in general vector autoregressions," Economics Papers, Economics Group, Nuffield College, University of Oxford 2009-W10, Economics Group, Nuffield College, University of Oxford.
  3. Nielsen, Bent, 2008. "On the Explosive Nature of Hyper-Inflation Data," Economics Discussion Papers, Kiel Institute for the World Economy 2008-9, Kiel Institute for the World Economy.
  4. Esposti, Roberto & Listorti, Giulia, 2011. "Agricultural Price Transmission Across Space and Commodities During Price Bubbles," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland, European Association of Agricultural Economists 114338, European Association of Agricultural Economists.
  5. Liu, Hui & Rodríguez, Gabriel, 2005. "Human activities and global warming: a cointegration analysis," MPRA Paper 9939, University Library of Munich, Germany.
  6. Listorti, Giulia & Esposti, Roberto, 2012. "Horizontal Price Transmission in Agricultural Markets: Fundamental Concepts and Open Empirical Issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), Italian Association of Agricultural and Applied Economics (AIEAA), issue 1, April.
  7. Xiaohu Wang & Jun Yu, 2013. "Limit Theory for an Explosive Autoregressive Process," Working Papers, Singapore Management University, School of Economics 08-2013, Singapore Management University, School of Economics.
  8. Kivedal, Bjørnar Karlsen, 2013. "Testing for rational bubbles in the US housing market," Journal of Macroeconomics, Elsevier, Elsevier, vol. 38(PB), pages 369-381.

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