Local Whittle estimation of multivariate fractionally integrated processes
This paper derives a semiparametric estimator of multivariate fractionally integrated processes covering both stationary and non-stationary values of d. We utilize the notion of the extended discrete Fourier transform and periodogram to extend the multivariate local Whittle estimator of Shimotsu (2007) to cover non-stationary values of d. We show consistency and asymptotic normality for d between -1/2 and infinity. A simulation study illustrates the performance of the proposed estimator for relevant sample sizes. Empirical justification of the proposed estimator is shown through an empirical analysis of log spot exchange rates. We find that the log spot exchange rates of Germany, United Kingdom, Japan, Canada, France, Italy, and Switzerland against the US Dollar for the period January 1974 until December 2001 are well decribed as I (1) processes.
|Date of creation:||08 Sep 2009|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.econ.au.dk/afn/|
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- Katsumi Shimotsu & Morten Ørregaard Nielsen, 2006.
"Determining the Cointegrating Rank in Nonstationary Fractional Systems by the Exact Local Whittle Approach,"
1029, Queen's University, Department of Economics.
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- Morten Oerregaard Nielsen, . "Optimal Residual Based Tests for Fractional Cointegration and Exchange Rate Dynamics," Economics Working Papers 2002-7, Department of Economics and Business Economics, Aarhus University.
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