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Testing for the Cointegration Rank when Some Cointegrating Directions are Shifting

Author

Listed:
  • Philippe Andrade

    (THEMA)

  • Catherine Bruneau

    (THEMA)

  • Stephane Gregoir

    (INSEE - CREST)

Abstract

In this paper we propose a multivariate analysis of a cointegrated vectorial autoregressive model with structural breaks affecting the cointegrating vectors. These changes are previously recognized using a single-equation methodology. Asymptotic properties of the breaks dates estimators allow us to implement a full information maximum likelihood analysis with the breaks identified considered as fixed. Thus, a VECM is estimated, providing a relevant framework to test for non-causality and neutrality tests, as well as impulse response analysis of the dynamics. The methodology is applied to the trivariate system analysed by Gregory and Hansen (1996), with a money variable, an interest rate and the output for the US over the 1960-1990 period.

Suggested Citation

  • Philippe Andrade & Catherine Bruneau & Stephane Gregoir, 2000. "Testing for the Cointegration Rank when Some Cointegrating Directions are Shifting," Econometric Society World Congress 2000 Contributed Papers 1605, Econometric Society.
    • Handle: RePEc:ecm:wc2000:1605
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    References listed on IDEAS

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