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A Unifying Framework for Analysing Common Cyclical Features in Cointegrated Time Series

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  • Gianluca Cubadda

    ()
    (SEFEMEQ, Universita’ di Roma "Tor Vergata")

Abstract

This paper provides a unifying framework in which the coexistence of different form of common cyclical features can be tested and imposed to a cointegrated VAR model. This goal is reached by introducing a new notion of common cyclical features, namely the weak form of polynomial serial correlation common features, which encompasses most of the previous ones. Statistical inference is obtained by means of reduced-rank regression, and alternative forms of common cyclical features are detected by means of tests for over-identifying restrictions on the parameters of the new model. Some iterative estimation procedures are then proposed for simultaneously modelling different forms of common features. Concepts and methods are illustrated by an empirical investigation of the US business cycle indicators.

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Bibliographic Info

Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 102.

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Length: 19
Date of creation: 21 May 2007
Date of revision:
Handle: RePEc:rtv:ceisrp:102

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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Keywords: Common Cyclical Features; Reduced Rank Regression.;

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References

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  1. Paruolo Paolo, 2003. "Common trends and cycles in I(2) VAR systems," Economics and Quantitative Methods, Department of Economics, University of Insubria qf0217bis, Department of Economics, University of Insubria.
  2. Gianluca Cubadda, 2007. "A Reduced Rank Regression Approach to Coincident and Leading Indexes Building," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(2), pages 271-292, 04.
  3. Paruolo Paolo, 2006. "Finite sample comparison of alternative tests on the rank of a cointegration submatrix," Economics and Quantitative Methods, Department of Economics, University of Insubria qf0606, Department of Economics, University of Insubria.
  4. Bai, Jushan & Lumsdaine, Robin L & Stock, James H, 1998. "Testing for and Dating Common Breaks in Multivariate Time Series," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(3), pages 395-432, July.
  5. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 5(1), pages 7-29, January.
  6. Cubadda, Gianluca & Omtzigt, Pieter, 2005. "Small-sample improvements in the statistical analysis of seasonally cointegrated systems," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 49(2), pages 333-348, April.
  7. Niels Haldrup & Svend Hylleberg & Gabriel Pons & Jaume Rosselló & Andreu Sansó, 2005. "Common Periodic Correlation Features and the Interaction of Stocks and Flows in Daily Airport Data," Economics Working Papers, School of Economics and Management, University of Aarhus 2005-03, School of Economics and Management, University of Aarhus.
  8. Cubadda, Gianluca, 1999. "Common Cycles in Seasonal Non-stationary Time Series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 14(3), pages 273-91, May-June.
  9. Robert F. Engle & João Victor Issler, 1993. "Common trends and common cycles in Latin America," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 47(2), pages 149-176, April.
  10. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, Elsevier, vol. 7(2), pages 151-174.
  11. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, Elsevier, vol. 53(1-3), pages 211-244.
  12. Proietti, Tommaso, 1997. "Short-Run Dynamics in Cointegrated Systems," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(3), pages 405-22, August.
  13. Mizon, Grayham E., 1995. "A simple message for autocorrelation correctors: Don't," Journal of Econometrics, Elsevier, Elsevier, vol. 69(1), pages 267-288, September.
  14. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
  15. Johansen, Soren, 1995. "Identifying restrictions of linear equations with applications to simultaneous equations and cointegration," Journal of Econometrics, Elsevier, Elsevier, vol. 69(1), pages 111-132, September.
  16. Paruolo Paolo, 2003. "Common dynamics in I(1) VAR systems," Economics and Quantitative Methods, Department of Economics, University of Insubria qf0316, Department of Economics, University of Insubria.
  17. Hecq, Alain & Palm, Franz C. & Urbain, Jean-Pierre, 2006. "Common cyclical features analysis in VAR models with cointegration," Journal of Econometrics, Elsevier, Elsevier, vol. 132(1), pages 117-141, May.
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Citations

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Cited by:
  1. Lindenberg, Nannette & Westermann, Frank, 2012. "Common trends and common cycles among interest rates of the G7-countries," Journal of Macroeconomics, Elsevier, Elsevier, vol. 34(4), pages 1125-1140.
  2. Nannette Lindenberg & Frank Westermann, 2009. "How Strong is the Case for Dollarization in Costa Rica? A Note on the Business Cycle Comovements with the United States," Working Papers, Institute of Empirical Economic Research 79, Institute of Empirical Economic Research.
  3. Justyna Wróblewska, 2012. "Bayesian Analysis of Weak Form Polynomial Reduced Rank Structures in VEC Models," Central European Journal of Economic Modelling and Econometrics, CEJEME, CEJEME, vol. 4(4), pages 253-267, December.
  4. Gianluca Cubadda & Alain Hecq & Franz C. Palm, 2008. "Studying Co-Movements in Large Multivariate Data Prior to Multivariate Modelling," CEIS Research Paper 125, Tor Vergata University, CEIS, revised 14 Jul 2008.
  5. Gianluca Cubadda & Barbara Guardabascio & Alain Hecq, 2012. "A General to Specific Approach for Constructing Composite Business Cycle Indicators," CEIS Research Paper 224, Tor Vergata University, CEIS, revised 27 Feb 2012.
  6. Espasa, Antoni & Mayo-Burgos, Iván, 2013. "Forecasting aggregates and disaggregates with common features," International Journal of Forecasting, Elsevier, Elsevier, vol. 29(4), pages 718-732.
  7. Gianluca Cubadda & Barbara Guardabascio, 2010. "A Medium-N Approach to Macroeconomic Forecasting," CEIS Research Paper 176, Tor Vergata University, CEIS, revised 09 Dec 2010.
  8. Nannette Lindenberg & Frank Westermann, 2012. "How strong is the case for dollarization in Central America? An empirical analysis of business cycles, credit market imperfections and the exchange rate," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 17(2), pages 147-166, 04.
  9. Marco Centoni & Gianluca Cubadda, 2011. "Modelling comovements of economic time series: a selective survey," Statistica, Department of Statistics, University of Bologna, Department of Statistics, University of Bologna, vol. 71(2), pages 267-294.

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