A Bootstrap Cointegration Rank Test for Panels of VAR Models
This paper proposes a sequential procedure to determine the common cointegration rank of panels of cointegrated VARs. It shows how a panel of cointegrated VARs can be transformed in a set of independent individual models. The likelihood function of the transformed panel is the sum of the likelihood functions of the individual Cointegrated VARs (CVAR) models. A bootstrap based procedure is used to compute empirical distributions of the trace test statistics for these individual models. From these empirical distributions two panel trace test statistics are constructed. The satisfying small sample properties of these tests are documented by means of Monte Carlo. An empirical application illustrates the usefullness of this tests.
|Date of creation:||01 Dec 2010|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.econ.au.dk/afn/|
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