Long-run exclusion and the determination of cointegrating rank: Monte Carlo evidence

Takamitsu Kurita

Mathematics and Computers in Simulation (MATCOM), 2011, vol. 81, issue 9, 1733-1740

Abstract: This note investigates long-run exclusion in a cointegrated vector autoregressive (VAR) model from the viewpoint of finite-sample statistical inference. Monte Carlo experiments show that, in various circumstances, a mis-specified partial VAR model, which is justified by the existence of a long-run excluded variable, can lead to better finite-sample inference for cointegrating rank than a fully specified VAR model. Implications of long-run exclusion for econometric modelling are then considered based on the Monte Carlo study.

Keywords: Long-run exclusion; Cointegrating rank; Cointegrated vector autoregressive model; Monte Carlo experiment (search for similar items in EconPapers)
JEL-codes: C32 C52 C63 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:81:y:2011:i:9:p:1733-1740

DOI: 10.1016/j.matcom.2011.01.007

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