Subsampling Cointegration Ranks in Large Systems
In this paper we investigate the possibility of the application of subsampling procedure for testing cointegration relations in large multivariate systems. The subsampling technique is applied to overcome the difficulty of nonstandard distribution and nuisance parameters in testing for cointegration rank without an explicitly formulated structural model. The contribution in this paper is twofold: theoretically this paper shows that the subsampling testing procedure is consistent and has asymptotically power 1;practically this paper demonstrates that the subsampling procedure can be applied to determine the cointegration rank in large scale models, where the standard procedures hits already its limit. For empirical relevant cases our simulation studies show that centered subsampling improves decisively the performance of subsampling test procedure and makes it applicable also for cases when the number of independent stochastic trends are very large.
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- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991.
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