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Generalized method of moments estimation for cointegrated vector autoregressive models

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  • Park, Suk K.
  • Ahn, Sung K.
  • Cho, Sinsup

Abstract

In this study, a generalized method of moments (GMM) for the estimation of nonstationary vector autoregressive models with cointegration is considered. Two iterative methods are considered: a simultaneous estimation method and a switching estimation method. The asymptotic properties of the GMM estimators of these methods are found to be the same as those of the Gaussian reduced-rank estimator. Through Monte Carlo simulation, the small-sample properties of the GMM estimators are studied and compared with those of the Gaussian reduced-rank estimator and the maximum likelihood estimator considered by other researchers. In the case of small samples, the GMM estimators are more robust to deviations from normality assumptions, particularly to outliers.

Suggested Citation

  • Park, Suk K. & Ahn, Sung K. & Cho, Sinsup, 2011. "Generalized method of moments estimation for cointegrated vector autoregressive models," Computational Statistics & Data Analysis, Elsevier, vol. 55(9), pages 2605-2618, September.
    • Handle: RePEc:eee:csdana:v:55:y:2011:i:9:p:2605-2618
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    References listed on IDEAS

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    1. Sikora, Grzegorz & Michalak, Anna & Bielak, Łukasz & Miśta, Paweł & Wyłomańska, Agnieszka, 2019. "Stochastic modeling of currency exchange rates with novel validation techniques," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 523(C), pages 1202-1215.
    2. Shang, Wenpeng & Wang, Xiao, 2017. "The generalized moment estimation of the additive–multiplicative hazard model with auxiliary survival information," Computational Statistics & Data Analysis, Elsevier, vol. 112(C), pages 154-169.
    3. Nicoleta ISAC & Cosmin DOBRIN & Mehmood HUSSAN & Asad ul Islam KHAN & Alina- Andreea MARIN, 2020. "On The Ranks Of Tests Having Null Of Cointegration: A Monte Carlo Comparison," Management Research and Practice, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 12(2), pages 58-69, June.

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