VAR Cointegration in VARMA Models

Wagner, Martin (May 1999) VAR Cointegration in VARMA Models. IHS Economics Series 65

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Abstract or Table of Contents

Abstract: The method for estimation and testing for cointegration put forward by Johansen assumes that the data are described by a vector autoregressive process. In this article we extend the data generating process to autoregressive moving average models without unit roots in the MA polynomial. We first extend some matrix algebraic relationships for I(1) processes and derive their implications for the structure theory of cointegration. Specifically we show that the cointegrating space is invariant to MA errors which have no unit roots in the MA polynomial. The above results permit to prove the robustness of the Johansen estimates of the cointegrating space in a Gaussian vector autoregressive framework when the true model is vector autoregressive moving average, without unit roots in the MA polynomial. The small sample properties of the theoretical results are examined through a small simulation study.;

Item Type: IHS Series
Keywords: 'Cointegration' 'Johansen procedure' 'Misspecification' 'Robustness' 'Simulation' 'Hausdorff distance'
Classification Codes (e.g. JEL): C13, C15, C32
Status: Published
Date Deposited: 26 Sep 2014 10:36
Last Modified: 04 Apr 2016 14:05
URI: http://irihs.ihs.ac.at/id/eprint/1159

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