A Nonlinear IV Likelihood-Based Rank Test for Multivariate Time Series and Long Panels

J. Miller

No 1001, Working Papers from Department of Economics, University of Missouri

Abstract: A test for the rank of a vector error correction model (VECM) or panel VECM based on the well-known trace test is proposed. The proposed test employs instrumental variables (IV's) generated by a class of nonlinear functions of the estimated stochastic trends of the VECM under the null. The test improves the standard trace test by replacing the non-standard critical values with chi-squared critical values. Extending the result to the panel VECM case, the test is robust to cross-sectional correlation of the disturbances. With this test, I extend earlier research using nonlinear IV's for unit root testing. However, the optimal instrument in the univariate case is not admissable in the more general multivariate case. The chi-squared result suggests that IV tests may be used to replace limits of other standard tests with integrated time series that are given by nonstandard stochastic integrals, even without a panel with which to pool tests.

Keywords: VECM; panel VECM; cointegrating rank; trace test; nonlinear instruments (search for similar items in EconPapers)
JEL-codes: C12 C32 C33 (search for similar items in EconPapers)
Pages: 22 pgs.
Date: 2010-01-30
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in Journal of Time Series Econometrics 2010

Downloads: (external link)
https://drive.google.com/file/d/1uEAjNqkahYUa6D52U ... Mrv/view?usp=sharing (application/pdf)

Related works:
Journal Article: A Nonlinear IV Likelihood-Based Rank Test for Multivariate Time Series and Long Panels (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1001

Access Statistics for this paper

More papers in Working Papers from Department of Economics, University of Missouri Contact information at EDIRC.
Bibliographic data for series maintained by Chao Gu ().