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Short-Run Parameter Changes in a Cointegrated Vector Autoregressive Model

Listed author(s):
  • Takamitsu Kurita


    (Dept of Economics, University of Oxford)

  • Bent Nielsen


    (Dept of Economics, University of Oxford)

This paper addresses the question of whether a conventional approach to cointegration is applicaple to the case where changes are allowed in the parameters for the short term dynamics. We reparametrise a vector autoregressive model such that the short-run parameters exhibiting changes at known points are explicitly given. We then show that the likelihood ratio test statistic for cointegration rank is based on reduced rank regression and has the usual asymptotic distribution. An empirical illustration using US gasoline prices is presented.

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Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2005-W01.

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Length: 16 pages
Date of creation: 01 Jan 2005
Handle: RePEc:nuf:econwp:0501
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