AUTOMATIC INFERENCE FOR INFINITE ORDER VECTOR AUTOREGRESSIONS

Guido Kuersteiner

Econometric Theory, 2005, vol. 21, issue 1, 85-115

Abstract: Infinite order vector autoregressive (VAR) models have been used in a number of applications ranging from spectral density estimation, impulse response analysis, and tests for cointegration and unit roots, to forecasting. For estimation of such models it is necessary to approximate the infinite order lag structure by finite order VARs. In practice, the order of approximation is often selected by information criteria or by general-to-specific specification tests. Unlike in the finite order VAR case these selection rules are not consistent in the usual sense, and the asymptotic properties of parameter estimates of the infinite order VAR do not follow as easily as in the finite order case. In this paper it is shown that the parameter estimates of the infinite order VAR are asymptotically normal with zero mean when the model is approximated by a finite order VAR with a data dependent lag length. The requirement for the result to hold is that the selected lag length satisfies certain rate conditions with probability tending to one. Two examples of selection rules satisfying these requirements are discussed. Uniform rates of convergence for the parameters of the infinite order VAR are also established.Very helpful comments by the editor and two referees led to a substantial improvement of the manuscript. I am particularly indebted to one of the referees for pointing out an error in the proofs. All remaining errors are my own. Financial support from NSF grant SES−0095132 is gratefully acknowledged.

Date: 2005
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