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Testing normalization and overidentification of cointegrating vectors in vector autoregressive processes

Listed author(s):
  • Pentti Saikkonen

This paper develops test procedures for testing the validity of general linear identifying restrictions imposed on cointegrating vectors in the context of a vector autoregressive model. In addition to overidentifying restrictions the considered restrictions may also involve normalizing restrictions. Tests for both types of restrictions are developed and their asymptotic properties are obtained. Under the null hypothesis tests for normalizing restrictions have an asymptotic "multivariate unit root distribution", similar to that obtained for the likelihood ratio test for cointegration, while tests for overidentifying restrictions have a standard chi-square limiting distribution. Since these two types of tests are asymptotically independent they are easy to cotnbine to an overall test for the spccifed identifying restrictions. An overall test of this kind can consistently reveal the failure of the identifying restrictions in a wider class of cases than previous tests which only test for overidentifying restrictions.

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Article provided by Taylor & Francis Journals in its journal Econometric Reviews.

Volume (Year): 18 (1999)
Issue (Month): 3 ()
Pages: 235-257

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Handle: RePEc:taf:emetrv:v:18:y:1999:i:3:p:235-257
DOI: 10.1080/07474939908800444
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