Further evidence on the size and power of the Bierens and Johansen cointegration procedures
Although both the Johansen (1991, 1994) trace test and Bierens (1997a,b) nonparametric lambda-min test for cointegration have good size properties in Monte Carlo studies by Hubrich, Lutkepohl, and Saikkonen (2001) and Boswijk, Lucas, and Taylor (2000), the Bierens test has very low power. In contrast, Bierens reports good power for his procedure. Meanwhile, Hubrich et al. and Boswijk et al. do not include Bierens' companion method for estimating the number of cointegrating vectors, nor do they investigate the effect of serial correlation on Bierens'' test. In the present paper, inclusion of the estimation step does not significantly degrade size of the Bierens procedure, even with serial correlation, but power is not improved. Serial correlation does degrade the size of the Johansen test, but it remains superior. Analysis of Bierens'' (1997b) Monte Carlo results suggests that their indication of high power reflects the test''s lack of scale invariance.
Volume (Year): 3 (2003)
Issue (Month): 25 ()
|Contact details of provider:|| |
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.:
- Bierens, Herman J., 1997.
"Nonparametric cointegration analysis,"
Journal of Econometrics,
Elsevier, vol. 77(2), pages 379-404, April.
- Toda, Hiro Y, 1994. "Finite Sample Properties of Likelihood Ratio Tests for Cointegrating Ranks when Linear Trends are Present," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 66-79, February.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- Cushman, David O. & Sang Sub Lee & Thorgeirsson, Thorsteinn, 1996. "Maximum likelihood estimation of cointegration in exchange rate models for seven inflationary OECD countries," Journal of International Money and Finance, Elsevier, vol. 15(3), pages 337-368, June.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Kirstin Hubrich & Helmut Lutkepohl & Pentti Saikkonen, 2001.
"A Review Of Systems Cointegration Tests,"
Taylor & Francis Journals, vol. 20(3), pages 247-318.
When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-03c30001. 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: (John P. Conley)
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.