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Analysis of co-explosive processes

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  • Bent Nielsen

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.nuff.ox.ac.uk/economics/papers/2005/w8/explosive.pdf
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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2005-W08.

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Date of creation: 01 Mar 2005
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Handle: RePEc:oxf:wpaper:2005-w08

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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. Bent Nielsen, 2003. "Correlograms for non-stationary autoregressions," Economics Series Working Papers 2003-W11, University of Oxford, Department of Economics.
  2. Bent Nielsen, 1999. "The Asymptotic Distribution of Unit Root Tests of Unstable Autoregressive Processes," Economics Series Working Papers 1999-W19, University of Oxford, Department of Economics.
  3. Taylor, Mark P, 1990. "The Hyperinflation Model of Money Demand Revisited," CEPR Discussion Papers 473, C.E.P.R. Discussion Papers.
  4. Johansen, S. & Schaumburg, E., 1997. "Likelihood Analysis of Seasonal Cointegration," Economics Working Papers eco97/16, European University Institute.
  5. Bent Nielsen, 2001. "Order determination in general vector autoregressions," Economics Papers 2001-W10, Economics Group, Nuffield College, University of Oxford.
  6. Bent Nielsen, 2004. "On the Distribution of Likelihood Ratio Test Statistics for Cointegration Rank," Econometric Reviews, Taylor & Francis Journals, vol. 23(1), pages 1-23.
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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. Kivedal, Bjørnar Karlsen, 2013. "Testing for rational bubbles in the US housing market," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 369-381.
  3. 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.
  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 114338, European Association of Agricultural Economists.
  5. Nielsen, Bent, 2008. "On the Explosive Nature of Hyper-Inflation Data," Economics Discussion Papers 2008-9, Kiel Institute for the World Economy.
  6. Xiaohu Wang & Jun Yu, 2013. "Limit Theory for an Explosive Autoregressive Process," Working Papers 08-2013, Singapore Management University, School of Economics.
  7. 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.
  8. Hui Liu & Gabriel Rodriguez, 2003. "Human Activities and Global Warming: A Cointegration Analysis," Working Papers 0307E, University of Ottawa, Department of Economics.

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