Bias correcting adjustment coefficients in a cointegrated VAR with known cointegrating vectors

Kees Jan van Garderen and H. Peter Boswijk ()

No 13-05, UvA-Econometrics Working Papers from Universiteit van Amsterdam, Dept. of Econometrics

Abstract: The maximum likelihood estimator of the adjustment coefficient in a cointegrated vector autoregressive model (CVAR) is generally biased. For the case where the cointegrating vector is known in a first-order CVAR with no intercept, we derive a condition for the unbiasedness of the maximum likelihood estimator of the adjustment coefficients, and provide a simple characterization of the bias in case this condition is violated. A feasible bias correction method is shown to virtually eliminate the bias over a large part of the parameter space.

Date: 2013-06-04
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Journal Article: Bias correcting adjustment coefficients in a cointegrated VAR with known cointegrating vectors (2014)
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