Frequency domain principal components estimation of fractionally cointegrated processes

Claudio Morana

No 321, Working Paper Series from European Central Bank

Abstract: In this paper we study the zero frequency spectral properties of fractionally cointegrated long memory processes and introduce a new frequency domain principal components estimator of the cointegration space and the factor loading matrix for the long memory factors. We find that for fractionally differenced (fractionally) cointegrated processes the squared multiple coherence at the zero frequency is equal to one, the spectral density matrix at the zero frequency is singular, and the factor loading and cointegrating matrices can be obtained from the eigenvectors of the spectral matrix at the zero frequency, associated with the positive and zero roots, respectively. A Monte Carlo simulation reveals that the proposed principal components estimator has already good properties with relatively small sample sizes. JEL Classification: C22

Keywords: fractional cointegration; frequency domain; long memory (search for similar items in EconPapers)
Date: 2004-03
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Citations: View citations in EconPapers (18)

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Journal Article: Frequency domain principal components estimation of fractionally cointegrated processes (2004)
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