Likelihood-Based Cointegration Analysis in Panels of Vector Error-Correction Models
We propose a likelihood-based framework for cointegration analysis in panels of a fixed number of vector error-correction (VEC) models. We obtain likelihood ratio statistics to test for a common cointegration rank across the individual VEC models with both heterogeneous and homogeneous cointegrating vectors. Their limiting distributions are a summation of the limiting behavior of Johansen trace statistics. We extend the asymptotic distribution theory to cover the case of an infinite cross-sectional dimension. We apply the framework to a dataset of exchange rates and appropriate monetary fundamentals. We find evidence for the validity of the monetary exchange rate model within a panel of VEC models for three major European countries, whereas the results based on individual VEC models for each of these countries separately are less supportive.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 21 (2003)
Issue (Month): 2 (April)
|Contact details of provider:|| Web page: http://www.amstat.org/publications/jbes/index.cfm?fuseaction=main|
|Order Information:||Web: http://www.amstat.org/publications/index.html|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yongcheol Shin & Ron P Smith & Mohammad Hashem Pesaran, 1998. "Pooled Mean Group Estimation of Dynamic Heterogeneous Panels," ESE Discussion Papers 16, Edinburgh School of Economics, University of Edinburgh.
- Rolf Larsson & Johan Lyhagen & Mickael Lothgren, 2001.
"Likelihood-based cointegration tests in heterogeneous panels,"
Royal Economic Society, vol. 4(1), pages 1-41.
- Larsson, Rolf & Lyhagen, Johan & Löthgren, Mickael, 1998. "Likelihood-Based Cointegration Tests in Heterogeneous Panels," SSE/EFI Working Paper Series in Economics and Finance 250, Stockholm School of Economics, revised 27 Aug 1998.
- Nicholas Sarantis, 1994. "The monetary exchange rate model in the long run: An empirical investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(4), pages 698-711, December.
- Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
- O'Connell, Paul G. J., 1998. "The overvaluation of purchasing power parity," Journal of International Economics, Elsevier, vol. 44(1), pages 1-19, February.
- Peter C.B. Phillips & Victor Solo, 1989. "Asymptotics for Linear Processes," Cowles Foundation Discussion Papers 932, Cowles Foundation for Research in Economics, Yale University.
- Phillips, Peter C B, 1995.
"Fully Modified Least Squares and Vector Autoregression,"
Econometric Society, vol. 63(5), pages 1023-1078, September.
- Peter C.B. Phillips, 1993. "Fully Modified Least Squares and Vector Autoregression," Cowles Foundation Discussion Papers 1047, Cowles Foundation for Research in Economics, Yale University.
- Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-144, January.
- Jan J.J. Groen, 1998.
"The Monetary Exchange Rate Model as a Long-Run Phenomenon,"
Tinbergen Institute Discussion Papers
98-082/2, Tinbergen Institute.
- Groen, Jan J. J., 2000. "The monetary exchange rate model as a long-run phenomenon," Journal of International Economics, Elsevier, vol. 52(2), pages 299-319, December.
- Shiller, Robert J. & Perron, Pierre, 1985.
"Testing the random walk hypothesis : Power versus frequency of observation,"
Elsevier, vol. 18(4), pages 381-386.
- Pierre Perron & Robert J. Shiller, 1984. "Testing the Random Walk Hypothesis: Power Versus Frequency of Observation," Cowles Foundation Discussion Papers 732, Cowles Foundation for Research in Economics, Yale University.
- Robert J. Shiller & Pierre Perron, 1985. "Testing the Random Walk Hypothesis: Power versus Frequency of Observation," NBER Technical Working Papers 0045, National Bureau of Economic Research, Inc.
- Kleibergen, F.R. & Urbain, J-P. & van Dijk, H.K., 1997.
"Oil Price Shocks and Long Run Price and Import Demand Behavior,"
Econometric Institute Research Papers
EI 9709-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Frank Kleibergen & Herman van Dijk & Jean-Pierre Urbain, 1999. "Oil Price Shocks and Long Run Price and Import Demand Behavior," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 51(3), pages 399-417, September.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-276, March.
- Peter C.B. Phillips, 1988.
"Optimal Inference in Cointegrated Systems,"
Cowles Foundation Discussion Papers
866R, Cowles Foundation for Research in Economics, Yale University, revised Aug 1989.
- Mussa, Michael, 1976. " The Exchange Rate, the Balance of Payments and Monetary and Fiscal Policy under a Regime of Controlled Floating," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 229-248.
- Peter C. B. Phillips & Hyungsik R. Moon, 1999.
"Linear Regression Limit Theory for Nonstationary Panel Data,"
Econometric Society, vol. 67(5), pages 1057-1112, September.
- Peter C.B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Cowles Foundation Discussion Papers 1222, Cowles Foundation for Research in Economics, Yale University.
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
- Park, Joon Y, 1992. "Canonical Cointegrating Regressions," Econometrica, Econometric Society, vol. 60(1), pages 119-143, January.
- Papell, David H., 1997. "Searching for stationarity: Purchasing power parity under the current float," Journal of International Economics, Elsevier, vol. 43(3-4), pages 313-332, November.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
- Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002.
"Unit root tests in panel data: asymptotic and finite-sample properties,"
Journal of Econometrics,
Elsevier, vol. 108(1), pages 1-24, May.
- Tom Doan, "undated". "LEVINLIN: RATS procedure to perform Levin-Lin-Chu test for unit roots in panel data," Statistical Software Components RTS00242, Boston College Department of Economics.
- Park, J.Y. & Ogaki, M., 1991. "Seemingly Unrelated Canonical Cointegrating Regressions," RCER Working Papers 280, University of Rochester - Center for Economic Research (RCER).
- Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-472, August.
When requesting a correction, please mention this item's handle: RePEc:bes:jnlbes:v:21:y:2003:i:2:p:295-318. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.