Common trends and cycles in I(2) VAR systems

Paolo Paruolo

Economics and Quantitative Methods from Department of Economics, University of Insubria

Abstract: This paper discusses common cycles in I(2) vector autoregressive (VAR) systems. Both static and dynamic cofeatures are considered. We consider application of these notions to different choices of stationary variables extracted from a VAR, including deviations from equilibria. This extension is based on the equilibrium dynamics representation of the system, which is introduced in this paper. Inference on the number of common features is addressed via reduced rank regression, as well as estimation of the cofeature relations and testing. An application to Australian prices illustrates the techniques presented in the paper. In the empirical application it is found that the deviation from one of the equilibria is an innovation process, whereas only trivial cases of cofeatures can be obtained for the equilibrium correction form.

Keywords: Common features; Cofeatures; Cointegration; Common trends; Common cycles; VAR; I(2); Reduced rank regression. (search for similar items in EconPapers)
Pages: 40 pages
Date: 2003-07
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https://www.eco.uninsubria.it/RePEc/pdf/QF2002_29.pdf (application/pdf)

Related works:
Journal Article: Common trends and cycles in I(2) VAR systems (2006)
Working Paper: Common trends and cycles in I(2) VAR systems (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ins:quaeco:qf0217bis

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