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A THREE‐STEP PROCEDURE FOR ESTIMATING AND TESTING COINTEGRATED ARMAX MODELS*

Taro Takimoto and Yuzo Hosoya

The Japanese Economic Review, 2004, vol. 55, issue 4, 418-450

Abstract: To deal with a variety of inferential problems on non‐stationary cointegrated time series, this paper proposes a computationally feasible method based on the Whittle likelihood and examines its performance. For the empirical application of our method, the paper investigates three sets of Japanese and US monetary and financial time‐series data. To evaluate the p‐value of the likelihood ratio statistic, we propose an approximation procedure based on the gamma distribution and the accompanying Laguerre expansion for reducing the computational burden. We also provide a numerical procedure for the asymptotic covariance matrix of the Whittle estimator.

Date: 2004
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https://doi.org/10.1111/j.1468-5876.2004.00317.x

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