Optimal Inference in Cointegrated Systems
This paper studies the properties of maximum likelihood estimates of co-integrated systems. Alternative formulations of such models are considered including a new triangular system error correction mechanism. It is shown that full system maximum likelihood brings the problem of inference within the family that is covered by the locally asymptotically mixed normal asymptotic theory provided that all unit roots in the system have been eliminated by specification and data transformation. This result has far reaching consequences. It means that cointegrating coefficient estimates are symmetrically distributed and median unbiased asymptotically, that an optimal asymptotic theory of inference applies and that hypothesis tests may be conducted using standard asymptotic chi-squared sets.
|Date of creation:||1988|
|Date of revision:||Aug 1989|
|Publication status:||Published in Econometrica (March 1991), 59(2): 283-306|
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- Lutkepohl, Helmut, 1984. "Linear transformations of vector ARMA processes," Journal of Econometrics, Elsevier, vol. 26(3), pages 283-293, December.
- Peter C.B. Phillips, 1987. "Multiple Regression with Integrated Time Series," Cowles Foundation Discussion Papers 852, Cowles Foundation for Research in Economics, Yale University.
- Peter C.B. Phillips & Bruce E. Hansen, 1988. "Statistical Inference in Instrumental Variables," Cowles Foundation Discussion Papers 869R, Cowles Foundation for Research in Economics, Yale University, revised Apr 1989.
- Peter C.B. Phillips, 1987.
"Weak Convergence of Sample Covariance Matrices to Stochastic Integrals via Martingale Approximations,"
Cowles Foundation Discussion Papers
846, Cowles Foundation for Research in Economics, Yale University.
- Phillips, P.C.B., 1988. "Weak Convergence of Sample Covariance Matrices to Stochastic Integrals Via Martingale Approximations," Econometric Theory, Cambridge University Press, vol. 4(03), pages 528-533, December.
- Sweeting, Trevor, 1983. "On estimator efficiency in stochastic processes," Stochastic Processes and their Applications, Elsevier, vol. 15(1), pages 93-98, June.
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