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Unbalanced Cointegration

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  • Javier Hualde

    ()
    (School of Economics and Business Administration, University of Navarra)

Abstract

Recently, increasing interest on the issue of fractional cointegration has emerged from theoretical and empirical viewpoints. Here, as opposite to the traditional prescription of unit root observables with weak dependent cointegrating errors, the orders of integration of these series are allowed to take real values, but, as in the traditional framework, equality of the orders of at least two observable series is necessary for cointegration. This assumption, in view of the real-valued nature of these orders could pose some difficulties, and in the present paper we explore some ideas related to this issue in a simple bivariate framework. First, in a situation of "nearcointegration", where the only difference with respect to the "usual" fractional cointegration is that the orders of the two observable series differ in an asymptotically negligible way, we analyse properties of standard estimates of the cointegrating parameter. Second, we discuss the estimation of the cointegrating parameter in a situation where the orders of integration of the two observables are truly different, but their corresponding balanced versions (with same order of integration) are cointegrated in the usual sense. A Monte Carlo study of finitesample performance and simulated series is included.

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Bibliographic Info

Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 06/05.

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Length: 42 pages pages
Date of creation: May 2005
Date of revision:
Publication status: Published, Econometric Theory, 2006, vol. 22(5): pp. 765-814
Handle: RePEc:una:unccee:wp0605

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Web page: http://www.unav.es/facultad/econom

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Cited by:
  1. Nielsen, Morten Ørregaard, 2009. "A Powerful Test Of The Autoregressive Unit Root Hypothesis Based On A Tuning Parameter Free Statistic," Econometric Theory, Cambridge University Press, vol. 25(06), pages 1515-1544, December.
  2. Hualde, Javier, 2014. "Estimation of long-run parameters in unbalanced cointegration," Journal of Econometrics, Elsevier, vol. 178(2), pages 761-778.
  3. Nielsen, Morten, 2008. "A Powerful Tuning Parameter Free Test of the Autoregressive Unit Root Hypothesis," Working Papers 08-05, Cornell University, Center for Analytic Economics.

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