Template-type: ReDif-Paper 1.0
Author-Name: Avarucci Marco 
Author-Name: Velasco Carlos 
Author-workplace-name: METEOR
Title: A Wald Test for the Cointegration Rank in Nonstationary Fractional Systems
Abstract: This paper develops new methods for determining the cointegration rank in a nonstationary fractionally integrated system, extending univariate optimal methods for testing the degree of integration. We propose a simple Wald test based on the singular value decompositionof the unrestricted estimate of the long run multiplier matrix. When the "strength" of the cointegrating relationship is less than 1/2, the test statistic has a standard asymptotic distribution, like Lagrange Multiplier tests exploiting local properties. We consider the behavior of our test under estimation of short run parameters and local alternatives. We compare our procedure with other cointegration tests based on dierent principles and find that the new method has better properties in a range of situations by using information on the alternative obtained through a preliminary estimate of the cointegration strength.
Keywords: Economics (Jel: A)
Series: Research Memoranda
Creation-Date: 2008
Number: 049
File-URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:7cf22060-c3bd-4223-824c-2e3b3170be16/datastreams/ASSET1/content
File-Format: application/pdf
File-Size: 290957
Handle: RePEc:unm:umamet:2008049