Cover Image

Testing for the Cointegrating Rank of a VAR Process with Level Shift and Trend Break

A test for the cointegrating rank of a vector autoregressive (VAR) process with a possible shift and broken linear trend is proposed. The break point is assumed to be known. The setup is a VAR process for cointegrated variables. The tests are not likelihood ratio tests but the deterministic terms including the broken trends are removed first by a GLS procedure and a likelihood ratio type test is applied to the adjusted series. The asymptotic null distribution of the test is derived and it is shown by a Monte Carlo experiment that the test has better small sample properties in many cases than a corresponding Gaussian likelihood ratio test for the cointegrating rank.
Year of publication:
2006
Authors: Trenkler, Carsten ; Saikkonen, Pentti ; Luetkepohl, Helmut
Institutions: Department of Economics, European University Institute
Subject: Cointegration | structural break | vector autoregressive process | error correction model
Series:
Type of publication: Book / Working Paper
Language: English
Notes:
The text is part of a series European University Institute Working Papers Number ECO2006/29
Classification: C32 - Time-Series Models
Source:
Persistent link: https://ebvufind01.dmz1.zbw.eu/10005816395
Similar items by subject
Similar items by person