Maximum likelihood estimation of the multivariate fractional cointegrating model
Departures from an economic equilibrium should be mean reverting. The deviations are often assumed to be integrated of order zero but this is too restrictive. It is sufficient that the shocks are integrated of an order less than one, i.e. they may be fractionally integrated. A fractionally cointegrated system is developed. Further, estimation and testing are discussed, analytically and by Monte Carlo simulations. The Monte Carlo simulations shows that it is much more severe to ignore fractional cointegration than incorporating it when it is not present.
|Date of creation:||22 Apr 1998|
|Date of revision:|
|Contact details of provider:|| Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden|
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
Web page: http://www.hhs.se/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Engle, Robert F & Granger, Clive W J, 1987.
"Co-integration and Error Correction: Representation, Estimation, and Testing,"
Econometric Society, vol. 55(2), pages 251-76, March.
- Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- G. Geoffrey Booth & Yiuman Tse, 1995. "Long memory in interest rate futures markets: A fractional cointegration analysis," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 15(5), pages 573-584, 08.
- Hylleberg, Svend & Mizon, Grayham E, 1989. "Cointegration and Error Correction Mechanisms," Economic Journal, Royal Economic Society, vol. 99(395), pages 113-25, Supplemen.
- Baillie, Richard T & Bollerslev, Tim, 1994.
" Cointegration, Fractional Cointegration, and Exchange Rate Dynamics,"
Journal of Finance,
American Finance Association, vol. 49(2), pages 737-45, June.
- Baillie, R.T. & Bollerslev, T., 1993. "Cointegration, Fractional Cointegration, and Exchange RAte Dynamics," Papers 9103, Michigan State - Econometrics and Economic Theory.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, December.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- Andersson, Michael K. & Gredenhoff, Mikael P., 1998. "Power and Bias of Likelihood Based Inference in the Cointegration Model under Fractional Cointegration," SSE/EFI Working Paper Series in Economics and Finance 221, Stockholm School of Economics.
- Cheung, Yin-Wong & Lai, Kon S, 1993. "A Fractional Cointegration Analysis of Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 103-12, January.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
- Sowell, Fallaw, 1990. "The Fractional Unit Root Distribution," Econometrica, Econometric Society, vol. 58(2), pages 495-505, March.
- Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107, December.
- Sowell, Fallaw, 1992. "Maximum likelihood estimation of stationary univariate fractionally integrated time series models," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 165-188.
- Li, Hongyi & Maddala, G. S., 1997.
"Bootstrapping cointegrating regressions,"
Journal of Econometrics,
Elsevier, vol. 80(2), pages 297-318, October.
- Tom Doan, . "RATS program to demonstrate bootstrapping with cointegration," Statistical Software Components RTZ00021, Boston College Department of Economics.
- Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
When requesting a correction, please mention this item's handle: RePEc:hhs:hastef:0233. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helena Lundin)
If references are entirely missing, you can add them using this form.