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Common trends and cycles in I(2) VAR systems

  • Paruolo, Paolo

This paper analyzes common cycles in I(2) vector autoregressive (VAR) systems. We consider di®erent choices of stationary variables extracted from a VAR, including deviations from equilibria. This extension is based on the equilibrium dynamics representation of the system, introduced in this paper. Inference on the number of common features is addressed via reduced rank regression, as well as estimation of the cofeature relations and testing. An application to Australian prices is presented; it is found that the deviation from one equilibrium relation is an innovation process, whereas no common cycles can be obtained for the acceleration rates.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 132 (2006)
Issue (Month): 1 (May)
Pages: 143-168

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Handle: RePEc:eee:econom:v:132:y:2006:i:1:p:143-168
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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  14. Boswijk, H. Peter, 2000. "Mixed Normality And Ancillarity In I(2) Systems," Econometric Theory, Cambridge University Press, vol. 16(06), pages 878-904, December.
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  19. Johansen, S., 1991. "Determination of Cointegration Rank in the Presence of a Linear Trend," Papers 76a, Helsinki - Department of Economics.
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  24. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 369-80, October.
  25. Cubadda, Gianluca, 1999. "Common Cycles in Seasonal Non-stationary Time Series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(3), pages 273-91, May-June.
  26. Paruolo Paolo, 2002. "Testing for common trends in conditional I(2) VAR models," Economics and Quantitative Methods qf0216, Department of Economics, University of Insubria.
  27. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
  28. Cubadda, Gianluca & Hecq, Alain, 2001. "On non-contemporaneous short-run co-movements," Economics Letters, Elsevier, vol. 73(3), pages 389-397, December.
  29. Paruolo Paolo, 2003. "Common dynamics in I(1) VAR systems," Economics and Quantitative Methods qf0316, Department of Economics, University of Insubria.
  30. Paruolo, Paolo & Rahbek, Anders, 1999. "Weak exogeneity in I(2) VAR systems," Journal of Econometrics, Elsevier, vol. 93(2), pages 281-308, December.
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