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Optimal Estimation Strategies for Bivariate Fractional Cointegration Systems

  • Marcel Aloy

    ()

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

  • Gilles de Truchis

    ()

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

Estimation methods of bivariate fractional cointegration models are numerous. In most cases they have non-equivalent asymptotic and finite sample properties, implying diffculties in determining an optimal estimation strategy. In this paper, we address this issue by means of simulations and provide useful guidance to practitioners. Our Monte Carlo study reveals the superiority of techniques that estimate jointly all parameters of interest, over those operating in two steps. In some cases, it also shows that estimators originally designed for the stationary cointegration, have good finite sample properties in non-stationary regions of the parameter space.

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Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1353.

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Length: 11 pages
Date of creation: 29 Oct 2013
Date of revision: 29 Oct 2013
Handle: RePEc:aim:wpaimx:1353
Contact details of provider: Web page: http://www.amse-aixmarseille.fr/en

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