Testing Cointegration Rank in Large Systems
AbstractIn this paper we investigate the possibility of the application of subsampling procedure for testing cointegration relations in large multivariate systems. The subsampling technique is applied to overcome the difficulty of nonstandard distribution and nuisance parameters in testing for cointegration rank without an explicitly formulated structural model. The contribution in this paper is twofold: theoretically this paper shows that the subsampling testing procedure is consistent and asymptotically most powerful; practically this paper demonstrates that the subsampling procedure can be applied to determine the cointegration rank in large scale models, where the standard procedures hits already its limit. Especially for the cases of few stochastic trends in a system, the subsampling procedure shows robust and reliable results.
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Bibliographic InfoPaper provided by EconWPA in its series Econometrics with number 0504002.
Length: 30 pages
Date of creation: 08 Apr 2005
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Note: Type of Document - pdf; pages: 30
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Cointegration; Large System; Nonparametric Tests; Subsampling; PPP;
Find related papers by JEL classification:
- C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
- C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
- C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-ECM-2005-04-16 (Econometrics)
- NEP-ETS-2005-04-16 (Econometric Time Series)
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