Local Whittle estimation of multivariate fractionally integrated processes

Frank Nielsen

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper derives a semiparametric estimator of multivariate fractionally integrated processes covering both stationary and non-stationary values of d. We utilize the notion of the extended discrete Fourier transform and periodogram to extend the multivariate local Whittle estimator of Shimotsu (2007) to cover non-stationary values of d. We show consistency and asymptotic normality for d between -1/2 and infinity. A simulation study illustrates the performance of the proposed estimator for relevant sample sizes. Empirical justification of the proposed estimator is shown through an empirical analysis of log spot exchange rates. We find that the log spot exchange rates of Germany, United Kingdom, Japan, Canada, France, Italy, and Switzerland against the US Dollar for the period January 1974 until December 2001 are well decribed as I (1) processes.

Keywords: fractional integration; local Whittle; long memory; multivariate semiparametric estimation; exchange rates (search for similar items in EconPapers)
JEL-codes: C14 C32 (search for similar items in EconPapers)
Pages: 30
Date: 2009-09-08
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2009-38

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