In 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 has asymptotically power 1;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. For empirical relevant cases our simulation studies show that centered subsampling improves decisively the performance of subsampling test procedure and makes it applicable also for cases when the number of independent stochastic trends are very large.
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Paper provided by EconWPA in its series Econometrics with number
0508010.
Find related papers by JEL classification: C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics C5 - Mathematical and Quantitative Methods - - Econometric Modeling C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
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