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Common trends and cycles in I(2) VAR systems

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  • Paruolo Paolo

    (Department of Economics, University of Insubria, Italy)

Abstract

This paper analyzes common cycles in I(2) vector autoregressive (VAR) systems. We consider di®erent choices of stationary variables extracted from a VAR, including deviations from equilibria. This extension is based on the equilibrium dynamics representation of the system, introduced in this paper. Inference on the number of common features is addressed via reduced rank regression, as well as estimation of the cofeature relations and testing. An application to Australian prices is presented; it is found that the deviation from one equilibrium relation is an innovation process, whereas no common cycles can be obtained for the acceleration rates.

Suggested Citation

  • Paruolo Paolo, 2004. "Common trends and cycles in I(2) VAR systems," Economics and Quantitative Methods qf0217tris, Department of Economics, University of Insubria.
    • Handle: RePEc:ins:quaeco:qf0217tris
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    References listed on IDEAS

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    Cited by:

    1. Cubadda, Gianluca, 2007. "A unifying framework for analysing common cyclical features in cointegrated time series," Computational Statistics & Data Analysis, Elsevier, vol. 52(2), pages 896-906, October.
    2. Gianluca Cubadda & Alain Hecq, 2021. "Reduced Rank Regression Models in Economics and Finance," CEIS Research Paper 525, Tor Vergata University, CEIS, revised 08 Nov 2021.
    3. Marco Centoni & Gianluca Cubadda, 2011. "Modelling comovements of economic time series: a selective survey," Statistica, Department of Statistics, University of Bologna, vol. 71(2), pages 267-294.
    4. Marco Centoni & Gianluca Cubadda, 2015. "Common Feature Analysis of Economic Time Series: An Overview and Recent Developments," CEIS Research Paper 355, Tor Vergata University, CEIS, revised 05 Oct 2015.
    5. Yuanyuan Li & Dietmar Bauer, 2020. "Modeling I(2) Processes Using Vector Autoregressions Where the Lag Length Increases with the Sample Size," Econometrics, MDPI, vol. 8(3), pages 1-28, September.
    6. Kurita, Takamitsu, 2020. "Likelihood-based tests for parameter constancy in I(2) CVAR models with an application to fixed-term deposit data," Journal of Multivariate Analysis, Elsevier, vol. 178(C).
    7. Franchi, Massimo & Paruolo, Paolo, 2011. "A characterization of vector autoregressive processes with common cyclical features," Journal of Econometrics, Elsevier, vol. 163(1), pages 105-117, July.

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