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LR cointegration tests when some cointegrating relations are known

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  • Paolo Paruolo

    (University of Insubria)

Abstract

This paper considers the asymptotic analysis of the likelihood ratio (LR), cointegration (CI) rank test in vector autoregressive models (VAR) when some CI vectors are known and fixed. It is shown that the limit law is free of nuisance parameters. In the case of LR tests against the alternative of completely unrestricted CI space, the limit law can be expressed as the convolution of known distributions. This deconvolution is employed to approximate the quantiles of the distribution, without resorting to new simulations.

Suggested Citation

  • Paolo Paruolo, 2001. "LR cointegration tests when some cointegrating relations are known," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 10(1), pages 123-137, January.
    • Handle: RePEc:spr:stmapp:v:10:y:2001:i:1:d:10.1007_bf02511644
    DOI: 10.1007/BF02511644
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    References listed on IDEAS

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    1. Johansen, Soren, 1992. "Determination of Cointegration Rank in the Presence of a Linear Trend," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 383-397, August.
    2. Jurgen A. Doornik, 1998. "Approximations To The Asymptotic Distributions Of Cointegration Tests," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 573-593, December.
    3. repec:bla:jecsur:v:12:y:1998:i:5:p:573-93 is not listed on IDEAS
    4. Paruolo, Paolo, 1996. "On the determination of integration indices in I(2) systems," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 313-356.
    5. Hansen, Bruce E., 1992. "Convergence to Stochastic Integrals for Dependent Heterogeneous Processes," Econometric Theory, Cambridge University Press, vol. 8(4), pages 489-500, December.
    6. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    7. Horvath, Michael T.K. & Watson, Mark W., 1995. "Testing for Cointegration When Some of the Cointegrating Vectors are Prespecified," Econometric Theory, Cambridge University Press, vol. 11(5), pages 984-1014, October.
    8. Anders Rahbek & Rocco Mosconi, 1999. "Cointegration rank inference with stationary regressors in VAR models," Econometrics Journal, Royal Economic Society, vol. 2(1), pages 76-91.
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    Cited by:

    1. Bernasconi, Michele & Kirchkamp, Oliver & Paruolo, Paolo, 2009. "Do fiscal variables affect fiscal expectations? Experiments with real world and lab data," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 253-265, May.
    2. Roger Hammersland, 2004. "Large T and small N : A three-step approach to the identification of cointegrating relationships in time series models with a small cross-sectional dimension," Working Paper 2004/15, Norges Bank.
    3. Omtzigt Pieter, 2002. "Automatic identification and restriction of the cointegration space," Economics and Quantitative Methods qf0213, Department of Economics, University of Insubria.
    4. Bernasconi, Michele & Kirchkamp, Oliver & Paruolo, Paolo, 2003. "Expectations and Perceived Causality in Fiscal Policy : An Experimental Analysis Using Real World Data," Papers 03-03, Sonderforschungsbreich 504.
    5. Cavaliere Giuseppe & Fanelli Luca & Paruolo Paolo, 2001. "Determining the number of cointegrating relations under rank constraints," Economics and Quantitative Methods qf0109, Department of Economics, University of Insubria.
    6. Giuseppe Cavaliere & Luca Fanelli & Paolo Paruolo, 2009. "Tests for cointegration rank and choice of the alternative," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 18(2), pages 169-191, July.
    7. Bertocco Giancarlo & Fanelli Luca & Paruolo Paolo, 2002. "On the determinants of inflation in Italy: evidence of cost-push effects before the European Monetary Union," Economics and Quantitative Methods qf0223, Department of Economics, University of Insubria.

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