Detecting Common Dynamics in Transitory Components

Christensen Timothy, Stan Hurn and Adrian Pagan
Additional contact information
Christensen Timothy: Yale University

Journal of Time Series Econometrics, 2011, vol. 3, issue 1, 28

Abstract: This paper considers VECMs for variables exhibiting cointegration and common features in the transitory components. While the presence of cointegration between the permanent components of series reduces the rank of the long-run multiplier matrix, a common feature among the transitory components leads to a rank reduction in the matrix summarizing short-run dynamics. The common feature also implies that there exists linear combinations of the first-differenced variables in a cointegrated VAR that are white noise and traditional tests focus on testing for this characteristic. An alternative, however, is to test the rank of the short-run dynamics matrix directly. Consequently, we use the literature on testing the rank of a matrix to produce some alternative test statistics. We also show that these are identical to one of the traditional tests. The performance of the different methods is illustrated in a Monte Carlo analysis which is then used to re-examine an existing empirical study. Finally, this approach is applied to provide a check for the presence of common dynamics in DSGE models.

Keywords: transitory components; common features; reduced rank; cointegration (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.2202/1941-1928.1088 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: Detecting Common Dynamics in Transitory Components (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:jtsmet:v:3:y:2011:i:1:n:3

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/jtse/html

DOI: 10.2202/1941-1928.1088

Access Statistics for this article

Journal of Time Series Econometrics is currently edited by Javier Hidalgo

More articles in Journal of Time Series Econometrics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().