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Dynamic Specification and Testing for Unit Roots and Co-Integration

Author

Listed:
  • Anindya Banerjee

Abstract

This paper provides an interpretation of the vast literature on testing for unit roots and estimating co-integrating relations. Emphasis is placed on identifying the particular ways in which methods of dynamic specification need to be modified in order to take account of the possible presence of unit roots in the time series being modelled. The discussion is undertaken in the settings of both single-equation and systems methods and attention is paid to problems of estimation and inference. It is argued that the importance of issues such as exogeneity and rich dynamic specification, developed in the context of stationary time series, carry over to a very large extent when dealing with non-stationary series.

Suggested Citation

  • Anindya Banerjee, 1994. "Dynamic Specification and Testing for Unit Roots and Co-Integration," Working Papers 914, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:914
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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_914.pdf
    File Function: First version 1994
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    References listed on IDEAS

    as
    1. Hendry, David F., 1984. "Monte carlo experimentation in econometrics," Handbook of Econometrics,in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 16, pages 937-976 Elsevier.
    2. Davidson, Russell & MacKinnon, James G, 1984. "Model Specification Tests Based on Artificial Linear Regressions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(2), pages 485-502, June.
    3. Russell Davidson & James G. MacKinnon, 1996. "The Size and Power of Bootstrap Tests," Working Papers 932, Queen's University, Department of Economics.
    4. Taylor, Larry W., 1987. "The size bias of White's information matrix test," Economics Letters, Elsevier, vol. 24(1), pages 63-67.
    5. West, Kenneth D & Wilcox, David W, 1996. "A Comparison of Alternative Instrumental Variables Estimators of a Dynamic Linear Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 281-293, July.
    6. Lancaster, Tony, 1984. "The Covariance Matrix of the Information Matrix Test," Econometrica, Econometric Society, vol. 52(4), pages 1051-1053, July.
    7. Davidson, Russell & MacKinnon, James G, 1992. "A New Form of the Information Matrix Test," Econometrica, Econometric Society, vol. 60(1), pages 145-157, January.
    8. Horowitz, Joel L., 1994. "Bootstrap-based critical values for the information matrix test," Journal of Econometrics, Elsevier, vol. 61(2), pages 395-411, April.
    9. Fischer, N. I. & Mammen, E. & Marron, J. S., 1994. "Testing for multimodality," Computational Statistics & Data Analysis, Elsevier, vol. 18(5), pages 499-512, December.
    10. Orme, Christopher, 1988. "The Calculation of the Information Matrix Test for Binary Data Models," The Manchester School of Economic & Social Studies, University of Manchester, vol. 56(4), pages 370-376, December.
    11. Alastair Hall, 1987. "The Information Matrix Test for the Linear Model," Review of Economic Studies, Oxford University Press, vol. 54(2), pages 257-263.
    12. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
    13. Chesher, Andrew & Spady, Richard, 1991. "Asymptotic Expansions of the Information Matrix Test Statistic," Econometrica, Econometric Society, vol. 59(3), pages 787-815, May.
    14. Chesher, Andrew, 1983. "The information matrix test : Simplified calculation via a score test interpretation," Economics Letters, Elsevier, vol. 13(1), pages 45-48.
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    Cited by:

    1. Kevin D. Hoover & Stephen J. Perez, 1999. "Data mining reconsidered: encompassing and the general-to-specific approach to specification search," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 167-191.

    More about this item

    Keywords

    dynamic specification; co-integration; unit roots; exogeneity;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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