Distribution-free Tests of Fractional Cointegration

Javier Hualde and Carlos Velasco

No 08/06, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

Abstract: We propose tests of the null of spurious relationship against the alternative of fractional cointegration among the components of a vector of fractionally integrated time series. Our test statistics have an asymptotic chi-square distribution under the null and rely on GLS-type of corrections which control for the short run correlation of the weak dependent components of the fractionally integrated processes. We emphasize corrections based on nonparametric modelization of the innovations' autocorrelation, relaxing important conditions which are standard in the literature, and, in particular, being able to consider simultaneously (asymptotically) stationary or nonstationary processes. Relatively weak conditions on the corresponding short run and memory parameter estimates are assumed. The new tests are consistent with a divergence rate that, in most of the cases, as we show in a simple situation, depends on the cointegration degree. Finite-sample properties of the tests are analysed by means of a Monte Carlo experiment.

Keywords: 35 (search for similar items in EconPapers)
JEL-codes: C12 C13 C22 (search for similar items in EconPapers)
Date: 2006-06-02
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (7)

Forthcoming, Econometric Theory

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Related works:
Journal Article: DISTRIBUTION-FREE TESTS OF FRACTIONAL COINTEGRATION (2008)
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