Likelihood Ratio Tests of Restrictions on Common Trends Loading Matrices in I(2) VAR Systems
H. Peter Boswijk () and
Econometrics, 2017, vol. 5, issue 3, 1-17
Likelihood ratio tests of over-identifying restrictions on the common trends loading matrices in I(2) VAR systems are discussed. It is shown how hypotheses on the common trends loading matrices can be translated into hypotheses on the cointegration parameters. Algorithms for (constrained) maximum likelihood estimation are presented, and asymptotic properties sketched. The techniques are illustrated using the analysis of the PPP and UIP between Switzerland and the US.
Keywords: cointegration; common trends; identification; VAR; I(2) (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:5:y:2017:i:3:p:28-:d:103006
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