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Common features and common I(2) trends in VAR systems

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  • Paruolo Paolo

    (Department of Economics, University of Insubria, Italy)

Abstract

This paper discusses serial correlation common features, CF, and integration of order 2, I(2), in VAR systems. The interplay of the CF restrictions and the I(2) conditions is discussed both for full VAR systems and for conditional systems with no levels and difference feedback, NF. Several notions of CF are introduced for I(2) systems; some of these are shown to be nested within the NF conditions. It is suggested to first test for I(2)-ness and next for CF. The test for I(2) can be conducted in the full system or under NF. It is shown that standard asymptotics apply once the integration indices, II, have been determined. The techinques are illustrated on the widely used UK money dataset.

Suggested Citation

  • Paruolo Paolo, 2002. "Common features and common I(2) trends in VAR systems," Economics and Quantitative Methods qf0217, Department of Economics, University of Insubria.
    • Handle: RePEc:ins:quaeco:qf0217
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    File URL: https://www.eco.uninsubria.it/RePEc/pdf/QF2002_29.pdf
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    References listed on IDEAS

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    1. La Torre Davide & Rocca Matteo, 2002. "C 1,1 functions and optimality conditions," Economics and Quantitative Methods qf0208, Department of Economics, University of Insubria.
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    Cited by:

    1. Haldrup, Niels & Hylleberg, Svend & Pons, Gabriel & Sanso, Andreu, 2007. "Common Periodic Correlation Features and the Interaction of Stocks and Flows in Daily Airport Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 21-32, January.
    2. Hecq, Alain & Palm, Franz C. & Urbain, Jean-Pierre, 2006. "Common cyclical features analysis in VAR models with cointegration," Journal of Econometrics, Elsevier, vol. 132(1), pages 117-141, May.
    3. Omtzigt, Pieter & Paruolo, Paolo, 2005. "Impact factors," Journal of Econometrics, Elsevier, vol. 128(1), pages 31-68, September.

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