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A Three‐Step Procedure For Estimating And Testing Cointegrated Armax Models

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  • TARO TAKIMOTO
  • YUZO HOSOYA

Abstract

To deal with a variety of inferential problems on non‐stationary cointegrated time series, this paper proposes a computationally feasible method based on the Whittle likelihood and examines its performance. For the empirical application of our method, the paper investigates three sets of Japanese and US monetary and financial time‐series data. To evaluate the p‐value of the likelihood ratio statistic, we propose an approximation procedure based on the gamma distribution and the accompanying Laguerre expansion for reducing the computational burden. We also provide a numerical procedure for the asymptotic covariance matrix of the Whittle estimator.

Suggested Citation

  • Taro Takimoto & Yuzo Hosoya, 2004. "A Three‐Step Procedure For Estimating And Testing Cointegrated Armax Models," The Japanese Economic Review, Japanese Economic Association, vol. 55(4), pages 418-450, December.
    • Handle: RePEc:bla:jecrev:v:55:y:2004:i:4:p:418-450
    DOI: 10.1111/j.1468-5876.2004.00317.x
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    References listed on IDEAS

    as
    1. Shimotsu, Katsumi, 2003. "Exact Local Whittle Estimation of Fractionally Cointegrated Systems," Economics Discussion Papers 8869, University of Essex, Department of Economics.
    2. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, Decembrie.
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    Cited by:

    1. Yuzo Hosoya & Taro Takimoto, 2010. "A numerical method for factorizing the rational spectral density matrix," Journal of Time Series Analysis, Wiley Blackwell, vol. 31(4), pages 229-240, July.

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