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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/

Related research

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 eco97/16, European University Institute.
  2. Taylor, Mark P, 1990. "The Hyperinflation Model of Money Demand Revisited," CEPR Discussion Papers 473, C.E.P.R. Discussion Papers.
  3. Bent Nielsen, 2003. "Correlograms for non-stationary autoregressions," Economics Papers 2003-W11, Economics Group, Nuffield College, University of Oxford.
  4. Bent Nielsen, 2001. "Order determination in general vector autoregressions," Economics Papers 2001-W10, Economics Group, Nuffield College, University of Oxford.
  5. Nielsen, Bent, 2001. "The Asymptotic Distribution of Unit Root Tests of Unstable Autoregressive Processes," Econometrica, Econometric Society, vol. 69(1), pages 211-19, January.
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Cited by:
  1. B. Nielsen, 2009. "Test for cointegration rank in general vector autoregressions," Economics Papers 2009-W10, Economics Group, Nuffield College, University of Oxford.
  2. 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), issue 1, April.
  3. Nielsen, Bent, 2008. "On the Explosive Nature of Hyper-Inflation Data," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(21), pages 1-29.
  4. Roberto ESPOSTI & Giulia LISTORTI, 2011. "Agricultural Price Transmission Across Space and Commodities During Price Bubbles," Working Papers 367, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  5. Liu, Hui & Rodríguez, Gabriel, 2005. "Human activities and global warming: a cointegration analysis," MPRA Paper 9939, University Library of Munich, Germany.
  6. Bjørnar Karlsen Kivedal, 2012. "Testing for rational bubbles in the housing market," Working Paper Series 13312, Department of Economics, Norwegian University of Science and Technology.

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