Cointegration and common factors

Alvaro Escribano and Daniel Peña

DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística

Abstract: Alternative common factors representations for cointegrated vectors are studied. It is shown that dynamic factor models produce as particular cases the alternative common trend representations for cointegrated variables available in the literature, including the one of Stock and Watson(1988). Furthermore, it is proved that common factor representations with I(1) components imply cointegration. A more efficient procedure for fmding the numbers of cointegrated vectors based on this dynamic factors model is suggested.

Keywords: Dynamic; factors; models; Cointegration; Common; factors; Unit; roots; VAR; models (search for similar items in EconPapers)
Date: 1993-04
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Citations: View citations in EconPapers (7)

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Journal Article: COINTEGRATION AND COMMON FACTORS (1994)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wsrepe:3680

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