ANALYSIS OF COEXPLOSIVE PROCESSES

Bent Nielsen

Econometric Theory, 2010, vol. 26, issue 3, 882-915

Abstract: A vector autoregressive model allowing for unit roots as well as an explosive characteristic root is developed. The Granger-Johansen representation shows that this results in processes with two common features: a random walk and an explosively growing process. Cointegrating and coexplosive vectors can be found that eliminate these common factors. The likelihood ratio test for a simple hypothesis on the coexplosive vectors is analyzed. The method is illustrated using data from the extreme Yugoslavian hyperinflation of the 1990s.

Date: 2010
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Working Paper: Analysis of co-explosive processes (2005)
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