Multivariate Lagrange Multiplier Tests for Fractional Integration
Morten Nielsen ()
Economics Working Papers from Department of Economics and Business Economics, Aarhus University
We introduce a multivariate Lagrange Multiplier (LM) test for fractional integration. We derive and analyze the LM statistic and show that it is asymptotically chi-squared distributed under local alternatives, and that, under Gaussianity, the LM test is asymptotically efficient against local alternatives. It is shown that the regression variant in Breitung & Hassler (2002, Journal of Econometrics 110, 167-185) is not equivalent to the LM test in the multivariate case, although it is in the univariate case. A generalization of the LM test that explicitly allows for different integration orders for each variate is also introduced. The finite sample properties of the LM test are evaluated and compared to the Breitung & Hassler (2002) test by Monte Carlo experiments. An application to multivariate time series of real interest rates for six countries is offered, demonstrating that more clear-cut evidence can be drawn from multivariate tests compared to conducting several univariate tests.
Keywords: Asymptotic Local Power; Efficient Test; Fractional Integration; Lagrange Multiplier Test; Multivariate Fractional Unit Root; Nonstationarity (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: Multivariate Lagrange Multiplier Tests for Fractional Integration (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aah:aarhec:2002-18
Access Statistics for this paper
More papers in Economics Working Papers from Department of Economics and Business Economics, Aarhus University
Bibliographic data for series maintained by ().