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Semiparametric error-correction models for cointegration with trends: Pseudo-Gaussian and optimal rank-based tests of the cointegration rank

Listed author(s):
  • Hallin, Marc
  • van den Akker, Ramon
  • Werker, Bas J.M.

This paper provides pseudo-Gaussian and locally optimal rank-based tests for the cointegration rank in linear cointegrated error-correction models with common trends and i.i.d. elliptical innovations. The proposed tests are asymptotically distribution-free, hence their validity does not depend on the actual distribution of the innovations. The proposed rank-based tests depend on the choice of scores, associated with a reference density that can freely be chosen. Under appropriate choices they are achieving the semiparametric efficiency bounds; when based on Gaussian scores, they moreover uniformly dominate their pseudo-Gaussian counterparts. Simulations show that the asymptotic analysis provides an accurate approximation to finite-sample behavior. The theoretical results are based on a complete picture of the asymptotic statistical structure of the model under consideration.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304407615002237
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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 190 (2016)
Issue (Month): 1 ()
Pages: 46-61

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Handle: RePEc:eee:econom:v:190:y:2016:i:1:p:46-61
DOI: 10.1016/j.jeconom.2015.08.003
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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