Unit Roots, Cointegration, and Pretesting in Var Models☆The views expressed here are the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System

Nikolay Gospodinov, Ana María Herrera and Elena Pesavento

A chapter in VAR Models in Macroeconomics – New Developments and Applications: Essays in Honor of Christopher A. Sims, 2013, vol. 32, pp 81-115 from Emerald Group Publishing Limited

Abstract: This article investigates the robustness of impulse response estimators to near unit roots and near cointegration in vector autoregressive (VAR) models. We compare estimators based on VAR specifications determined by pretests for unit roots and cointegration as well as unrestricted VAR specifications in levels. Our main finding is that the impulse response estimators obtained from the levels specification tend to be most robust when the magnitude of the roots is not known. The pretest specification works well only when the restrictions imposed by the model are satisfied. Its performance deteriorates even for small deviations from the exact unit root for one or more model variables. We illustrate the practical relevance of our results through simulation examples and an empirical application.

Keywords: Impulse response functions; structural VAR; short/long-run identification; pretesting; unit roots; cointegration; C32; C51; E52 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
https://www.emerald.com/insight/content/doi/10.110 ... 9053(2013)0000031003

Related works:
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:eme:aecozz:s0731-9053(2013)0000031003

DOI: 10.1108/S0731-9053(2013)0000031003

Access Statistics for this chapter

More chapters in Advances in Econometrics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().