Testing for the cointegrating rank of a VAR process with an intercept

by Pentti Saikkonen and Helmut Lütkepohl

Testing the cointegrating rank of a vector autoregressive process with an intercept is considered. In addition to the likelihood ratio (LR) tests developed by Johansen and Juselius and others we also consider an alternative class of tests which is based on estimating the trend parameters of the deterministic term in a different way. The asymptotic local power of these tests is derived and compared to that of the corresponding LR tests. The small sample properties are investigated by simulations. The new tests are seen to be substantially more powerful than conventional LR tests.

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Year of publication:	1998
Authors:	Saikkonen, Pentti ; Lütkepohl, Helmut
Institutions:	Sonderforschungsbereich Quantifikation und Simulation Ökonomischer Prozesse (contributor)
Publisher:	Berlin : Humboldt-Universität
Subject:	Theorie \| Theory \| Kausalanalyse \| Causality analysis \| Zeitreihenanalyse \| Time series analysis \| Kointegration \| Cointegration \| VAR-Modell \| VAR model \| Statistischer Test \| Statistical test