Trend-Stationarity in the I(2) Cointegration Model
A representation for I(2) processes is derived which allows for trend-stationary components and restricts the deterministic part of the process to be at most linear. A two-step statistical analysis of the model is derived. The joint test of I(1) and I(2) cointegrating ranks is shown to be asymptotically similar with respect to the drift terms. The asymptotic distribution is tabulated and an application for UK monetary data illustrates the proposed statistical methods.
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|Date of creation:||Jun 1996|
|Publication status:||Published in: Journal of Econometrics, 90(2) 1999, pp 265-89|
|Contact details of provider:|| Postal: Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark|
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866R, Cowles Foundation for Research in Economics, Yale University, revised Aug 1989.
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International Finance Discussion Papers
383, Board of Governors of the Federal Reserve System (U.S.).
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