TESTING LINEAR RESTRICTIONS ON COINTEGRATING VECTORS: SIZES AND POWERS OF WALD AND LIKELIHOOD RATIO TESTS IN FINITE SAMPLES
Alfred Haug ()
Econometric Theory, 2002, vol. 18, issue 2, 505-524
The Wald test for linear restrictions on cointegrating vectors is compared in finite samples using the Monte Carlo method. The Wald test is calculated within the vector error-correction based estimation methods of Bewley, Orden, Yang, and Fisher (1994, Journal of Econometrics 64, 3â€“27) and of Johansen (1991, Econometrica 59, 1551â€“1580), the canonical cointegration method of Park (1992, Econometrica 60, 119â€“143), the dynamic ordinary least squares method of Phillips and Loretan (1991, Review of Economic Studies 58, 407â€“436), Saikkonen (1991, Econometric Theory 7, 1â€“21), and Stock and Watson (1993, Econometrica 61, 783â€“820), the fully modified ordinary least squares method of Phillips and Hansen (1990, Review of Economic Studies 57, 99â€“125), and the band spectral techniques of Phillips (1991, in W. Barnett, J. Powell, & G. E. Tauchen (eds.), Nonparametric and Semiparametric Methods in Economics and Statistics, pp. 413â€“435). The Wald test performance is also compared to that of the likelihood ratio test suggested by Johansen and Juselius (1990, Oxford Bulletin of Economics and Statistics 52, 169â€“210) and to a Bartlett correction of that test as proposed by Johansen (1998, A Small Sample Test for Tests of Hypotheses on Cointegrating Vectors, European University Institute).
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