Cointegrating rank selection in models with time-varying variance

Xu Cheng and Peter Phillips

Journal of Econometrics, 2012, vol. 169, issue 2, 155-165

Abstract: Reduced rank regression (RRR) models with time varying heterogeneity are considered. Standard information criteria for selecting cointegrating rank are shown to be weakly consistent in semiparametric RRR models in which the errors have general nonparametric short memory components and shifting volatility provided the penalty coefficient Cn→∞ and Cn/n→0 as n→∞. The AIC criterion is inconsistent and its limit distribution is given. The results extend those in Cheng and Phillips (2009a) and are useful in empirical work where structural breaks or time evolution in the error variances is present. An empirical application to exchange rate data is provided.

Keywords: Cointegrating rank; Heterogeneity; Information criteria; Model selection; Time varying variances (search for similar items in EconPapers)
JEL-codes: C22 C32 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304407612000322
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Cointegrating Rank Selection in Models with Time-Varying Variance (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:169:y:2012:i:2:p:155-165

DOI: 10.1016/j.jeconom.2012.01.022

Access Statistics for this article

Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson

More articles in Journal of Econometrics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().