On the small sample properties of weak exogeneity tests in cointegrated VAR models
AbstractWe investigate the small sample properties of two types of weak exogeneity tests in cointegrated VAR models that are frequently used in applied work. The first one is the standard Likelihood Ratio (LR) test in the Johansen framework. The second test is based on mapping the cointegrated VAR model into VECM representation and then reducing the model using some model selection procedure before testing the significance of the alpha parameters. Results from Monte Carlo experiments indicate severe size distortions in both test types in small samples. We suggest a bootstrap version of the LR test, which can be used for size correction. --
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Bibliographic InfoPaper provided by Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes in its series SFB 373 Discussion Papers with number 2002,2.
Date of creation: 2002
Date of revision:
Cointegration; weak exogeneity; bootstrap test; Subset VECM;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
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