Estimation of Continuous and Discrete Time Co-integrated Systems with Stock and Flow Variables

González Olivares Daniel () and Guizar Isai
Additional contact information
González Olivares Daniel: Departamento de Economía, CUCEA, Universidad de Guadalajara, Guadalajara, Mexico
Guizar Isai: Departamento de Economía, CUCEA, Universidad de Guadalajara, Guadalajara, Mexico

Journal of Time Series Econometrics, 2021, vol. 13, issue 2, 145-186

Abstract: This paper proposes an exact discrete time error correction model for co-integrated systems in continuous time and outlines a computationally efficient algorithm that leads to the Gaussian estimates of the model’s parameters. Its performance in estimation is assessed by contrasting our estimates with those obtained after applying Johansen’s discrete time approach to cointegrated systems. The data, for analysis, consist of two simulated systems; one comprised entirely of stock variables and another one formed by flow variables. In the results, we show that for the system with stock variables Johansen’s approach and ours perform similarly. For the system with flow variables, however, Johansen’s estimates show a persistent estimation bias with negligible improvements in larger samples, while ours yields a smaller bias that lowers as the sample size increases. As our model incorporates a moving average component in the error term that permits full dynamics, we argue that Johansen’s bias reflects the cost of ignoring aggregation in the specification.

Keywords: temporal aggregation; cointegration; continuous time system; exact discrete representation (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/jtse-2019-0026 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
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:13:y:2021:i:2:p:145-186:n:3

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

DOI: 10.1515/jtse-2019-0026

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 ().