Resource title

Testing for the cointegrating rank of a VAR process with level shift and trend break

Resource image

image for OpenScout resource :: Testing for the cointegrating rank of a VAR process with level shift and trend break

Resource description

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.

Resource author

Carsten Trenkler, Pentti Saikkonen, Helmut L├╝tkepohl

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25150

Resource license

Adapt according to the presented license agreement and reference the original author.