Estimation of the cointegrating rank in fractional cointegration

Javier Hualde ()
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Javier Hualde: Departamento de Economía-UPNA, https://www.unavarra.es/departamento-economia

Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra from Departamento de Economía - Universidad Pública de Navarra

Abstract: This paper proposes an estimator of the cointegrating rank of a potentially cointegrated multivariate fractional process. Our setting is very flexible, allowing the individual observable processes to have different integration orders. The proposed method is automatic and can be also employed to infer the dimensions of possible cointegrating subspaces, which are characterized by special directions in the cointegrating space which generate cointegrating errors with smaller integration orders, increasing the “achievement” of the cointegration analysis. A Monte Carlo experiment of finite sample performance and an empirical analysis are included.

Keywords: fractional integration; cointegrating rank; cointegrating space and subspaces. (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ecm and nep-ets
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