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A new criteria for selecting the optimum lags in Johansen's cointegration technique

  • Mohsen Bahmani-Oskooee
  • Taggert Brooks

Several test statistics like Akaike Information Criterion (AIC) or Schwarz Bayesian Criterion (SBC) are used to select the order of Vector Autoregressive Models (VAR) in Johansen's cointegration technique, but not the appropriate cointegrating vector in case of multiple vectors. In this note goodness of fit is introduced as a criterion to select the lag length as well as the appropriate vector simultaneously.

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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): 8 ()
Pages: 875-880

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Handle: RePEc:taf:applec:v:35:y:2003:i:8:p:875-880
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  1. 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.
  2. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  3. Marquez, Jaime, 1990. "Bilateral Trade Elasticities," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 70-77, February.
  4. Warner, Dennis & Kreinin, Mordechai E, 1983. "Determinants of International Trade Flows," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 96-104, February.
  5. Mohsen Bahmani-Oskooee, 1998. "Cointegration Approach to Estimate the Long-Run Trade Elasticities in LDCs," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 89-96.
  6. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
  7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  8. 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.
  9. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
  10. Bahmani-Oskooee, Mohsen, 1986. "Determinants of international trade flows : The Case of Developing Countries," Journal of Development Economics, Elsevier, vol. 20(1), pages 107-123.
  11. Mohsen Bahmani-Oskooee, 1995. "The Long-Run Determinants of the U.S. Trade Balance Revisited," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 17(3), pages 457-465, April.
  12. Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-25, May.
  13. Bahmani-Oskooee, Mohsen, 1996. "The black market exchange rate and demand for money in Iran," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 171-176.
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