Nonstationary Cointegration In The Fractionally Cointegrated Var Model

Morten Nielsen and Soren Johansen

No 1405, Working Paper from Economics Department, Queen's University

Abstract: We consider the fractional cointegrated vector autoregressive (CVAR) model of Johansen and Nielsen (2012a) and make two distinct contributions. First, in their consistency proof, Johansen and Nielsen (2012a) imposed moment conditions on the errors that depend on the parameter space, such that when the parameter space is larger, stronger moment conditions are required. We show that these moment conditions can be relaxed, and for consistency we require just eight moments regardless of the parameter space. Second, Johansen and Nielsen (2012a) assumed that the cointegrating vectors are stationary, and we extend the analysis to include the possibility that the cointegrating vectors are nonstationary. Both contributions require new analysis and results for the asymptotic properties of the likelihood function of the fractional CVAR model, which we provide. Finally, our analysis follows recent research and applies a parameter space large enough that the usual (non-fractional) CVAR model constitutes an interior point and hence can be tested against the fractional model using a ?²-test.

Keywords: likelihood inference; fractional integration; cointegration; vector autoregressive model (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2018-08
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1405.pdf First version 2018 (application/pdf)

Related works:
Journal Article: Nonstationary Cointegration in the Fractionally Cointegrated VAR Model (2019)
Working Paper: Nonstationary cointegration in the fractionally cointegrated VAR model (2018)
Working Paper: Nonstationary cointegration in the fractionally cointegrated VAR model (2018)
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