Semiparametric estimation of a bivariate fractionally cointegrated system is considered. We propose a two-step procedure that accommodates both (asymptotically) stationary (d<1/2) and nonstationary (d>=1/2) stochastic trend and/or equilibrium error. A tapered version of the local Whittle estimator of Robinson (2008) is...</1/2)>

Recently, Shimotsu and Phillips (2005) developed a new semiparametric estimator, the exact local Whittle (ELW) estimator, of the memory parameter (d) in fractionally integrated processes. The ELW estimator has been shown to be consistent and have the same N(0,1/4) limit distribution for all...