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Modified lag augmented vector autoregressions

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  • Eiji Kurozumi
  • Taku Yamamoto

Abstract

This paper proposes an inference procedure for a possibly integrated vector autoregression (VAR) model. We modify the lag augmented VAR (LA-VAR) estimator to exclude the quasiasymptotic bias, which is associated with the term Op(T-1), using the jackknife method. The new estimator has an asymptotic normal distribution and then the Wald statistic to test for the parameter restrictions has an asymptotic chi-square distribut,ion. We investigate the finite sample properties of this approach by comparing with the LA-VAR approach. We find t,hat our modified LA-VAR (MLA-VAR) approach excels the LA-VAR approach in view of an accuracy of the empirical size and the robustness to the tnisspecification of the lag length. The MLA-VAR approach may be used when the researchers place importance on an accuracy of the size, and also be used to complement other testing procedures that may suffer from serious size distortion.

Suggested Citation

  • Eiji Kurozumi & Taku Yamamoto, 2000. "Modified lag augmented vector autoregressions," Econometric Reviews, Taylor & Francis Journals, vol. 19(2), pages 207-231.
  • Handle: RePEc:taf:emetrv:v:19:y:2000:i:2:p:207-231 DOI: 10.1080/07474930008800468
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    2. DUFOUR, Jean-Marie & JOUINI, Tarek, 2005. "Finite-Sample Simulation-Based Inference in VAR Models with Applications to Order Selection and Causality Testing," Cahiers de recherche 16-2005, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    3. Wolde-Rufael, Yemane, 2005. "Energy demand and economic growth: The African experience," Journal of Policy Modeling, Elsevier, vol. 27(8), pages 891-903, November.
    4. Ghosh, Sajal & Kanjilal, Kakali, 2016. "Co-movement of international crude oil price and Indian stock market: Evidences from nonlinear cointegration tests," Energy Economics, Elsevier, vol. 53(C), pages 111-117.
    5. Dufour, Jean-Marie & Jouini, Tarek, 2006. "Finite-sample simulation-based inference in VAR models with application to Granger causality testing," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 229-254.
    6. Ioanna Apostolidou & Achilleas Kontogeorgos & Anastasios Michailidis & Efstratios Loizou, 2014. "The Role of Agriculture in Economic Growth: A Comparison of Mediterranean and Northern Views in Europe," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 7(3), pages 81-102, December.
    7. Kurozumi, Eiji & Aono, Kohei, 2013. "Estimation And Inference In Predictive Regressions," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 54(2), pages 231-250, December.
    8. Squalli, Jay, 2007. "Electricity consumption and economic growth: Bounds and causality analyses of OPEC members," Energy Economics, Elsevier, vol. 29(6), pages 1192-1205, November.
    9. Jacint Balaguer & Tatiana Florica & Jordi Ripollés, 2015. "Foreign trade and economic growth in Spain (1900–2012): the role of energy imports," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(3), pages 359-375, December.
    10. Herath, Nisal, 2014. "Impact of Oil Price Shocks on the Sri Lankan Economy: A Vector Auto Regression Assessment," Sri Lankan Journal of Agricultural Economics, Sri Lanka Agricultural Economics Association (SAEA), vol. 16.
    11. Jain, Anshul & Ghosh, Sajal, 2013. "Dynamics of global oil prices, exchange rate and precious metal prices in India," Resources Policy, Elsevier, vol. 38(1), pages 88-93.
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    13. Amiri, Arshia & Ventelou, Bruno, 2012. "Granger causality between total expenditure on health and GDP in OECD: Evidence from the Toda–Yamamoto approach," Economics Letters, Elsevier, vol. 116(3), pages 541-544.
    14. Wolde-Rufael, Yemane, 2004. "Disaggregated industrial energy consumption and GDP: the case of Shanghai, 1952-1999," Energy Economics, Elsevier, vol. 26(1), pages 69-75, January.
    15. Alam, Mohammad Jahangir & Begum, Ismat Ara & Buysse, Jeroen & Rahman, Sanzidur & Van Huylenbroeck, Guido, 2011. "Dynamic modeling of causal relationship between energy consumption, CO2 emissions and economic growth in India," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(6), pages 3243-3251, August.
    16. Wolde-Rufael, Yemane, 2006. "Electricity consumption and economic growth: a time series experience for 17 African countries," Energy Policy, Elsevier, vol. 34(10), pages 1106-1114, July.
    17. Ghosh, Sajal & Kanjilal, Kakali, 2014. "Long-term equilibrium relationship between urbanization, energy consumption and economic activity: Empirical evidence from India," Energy, Elsevier, vol. 66(C), pages 324-331.
    18. Tsani, Stela Z., 2010. "Energy consumption and economic growth: A causality analysis for Greece," Energy Economics, Elsevier, vol. 32(3), pages 582-590, May.

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