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Likelihood-Based Inference for Weak Exogeneity in (2) Cointegrated VAR Models

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  • Takamitsu Kurita

Abstract

This article develops limit theory for likelihood analysis of weak exogeneity in I(2) cointegrated vector autoregressive (VAR) models incorporating deterministic terms. Conditions for weak exogeneity in I(2) VAR models are reviewed, and the asymptotic properties of conditional maximum likelihood estimators and a likelihood-based weak exogeneity test are then investigated. It is demonstrated that weak exogeneity in I(2) VAR models allows us to conduct asymptotic conditional inference based on mixed Gaussian distributions. It is then proved that a log-likelihood ratio test statistic for weak exogeneity in I(2) VAR models is asymptotically χ2 distributed. The article also presents an empirical illustration of the proposed test for weak exogeneity using Japan's macroeconomic data.

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  • Takamitsu Kurita, 2012. "Likelihood-Based Inference for Weak Exogeneity in (2) Cointegrated VAR Models," Econometric Reviews, Taylor & Francis Journals, vol. 31(3), pages 325-360.
    • Handle: RePEc:taf:emetrv:v:31:y:2012:i:3:p:325-360
    DOI: 10.1080/07474938.2011.607346
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    Cited by:

    1. Kurita, Takamitsu, 2020. "Likelihood-based tests for parameter constancy in I(2) CVAR models with an application to fixed-term deposit data," Journal of Multivariate Analysis, Elsevier, vol. 178(C).
    2. Yuanyuan Li & Dietmar Bauer, 2020. "Modeling I(2) Processes Using Vector Autoregressions Where the Lag Length Increases with the Sample Size," Econometrics, MDPI, vol. 8(3), pages 1-28, September.

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