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Testing for autocorrelation in non-stationary dynamic systems of equations

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  • Shakir Hussain
  • Ghazi Shukur

Abstract

Using Monte Carlo methods, the properties of systemwise generalizations of the Breusch-Godfrey test for autocorrelated errors are studied in integrated cointegrated systems of equations. Our analysis, regarding the size of the test, reveals that the corrected LR tests have been shown to perform satisfactorily even in cases when the exogenous variables follow a unit root process, whilst the commonly used TR2 test behaves badly even in single equations. All tests perform badly, however, when the number of equations increases and the exogenous variables are highly autocorrelated.

Suggested Citation

  • Shakir Hussain & Ghazi Shukur, 2003. "Testing for autocorrelation in non-stationary dynamic systems of equations," Journal of Applied Statistics, Taylor & Francis Journals, vol. 30(4), pages 441-454.
  • Handle: RePEc:taf:japsta:v:30:y:2003:i:4:p:441-454
    DOI: 10.1080/0266476032000035467
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    References listed on IDEAS

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    1. Breusch, T S, 1978. "Testing for Autocorrelation in Dynamic Linear Models," Australian Economic Papers, Wiley Blackwell, vol. 17(31), pages 334-355, December.
    2. Godfrey, Leslie G, 1978. "Testing for Higher Order Serial Correlation in Regression Equations When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1303-1310, November.
    3. David Edgerton & Ghazi Shukur, 1999. "Testing autocorrelation in a system perspective testing autocorrelation," Econometric Reviews, Taylor & Francis Journals, vol. 18(4), pages 343-386.
    4. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
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