GVAR: A Case of Spurious Cross-Sectional Cointegration

Piotr Kębłowski ()
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Piotr Kębłowski: University of Łódź

Central European Journal of Economic Modelling and Econometrics, 2021, vol. 13, issue 2, 175-187

Abstract: Global Vector Autoregressive models came to be used quite widely in empirical studies using macroeconomic non-stationary panel data for the global economy. In this paper, it is shown that when the loading matrix of the cointegrating vectors is not block-diagonal and the cross-sectional spillovers of disequilibrium exist, the use of the GVAR model leads to spurious cross-sectional long-run relationships. Moreover, the results of Monte Carlo simulation show that the GVAR model is outperformed by other valid econometric approaches in terms of the maximum likelihood estimator of long-run coefficients, when the cointegrating vectors matrix is block-diagonal.

Keywords: global VAR; GVAR; panel VAR; PVAR; spurious cross-sectional cointegration (search for similar items in EconPapers)
JEL-codes: C10 C18 C33 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:psc:journl:v:13:y:2021:i:2:p:175-187

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