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Model-based asymptotic inference on the effect of infrequent large shocks on cointegrated variables

  • Georgiev, Iliyan
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    Quasi-maximum-likelihood (QML) estimation of a model combining cointegration in the conditional mean and rare large shocks (outliers) with a factor structure in the innovations is studied. The goal is not only to robustify inference on the conditional-mean parameters, but also to find regularities and conduct inference on the instantaneous and long-run effect of the large shocks. Given the cointegration rank and the factor order, [chi]2 asymptotic inference is obtained for the cointegration vectors, the short-run parameters, and the direction of each column of both the factor loading matrix and the matrix of long-run impacts of the large shocks. Large shocks, whose location is assumed unknown a priori, can be detected and classified consistently into the factor components.

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    Article provided by Elsevier in its journal Journal of Econometrics.

    Volume (Year): 158 (2010)
    Issue (Month): 1 (September)
    Pages: 37-50

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    Handle: RePEc:eee:econom:v:158:y:2010:i:1:p:37-50
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    1. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521471626.
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