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Comparison of tests for the cointegrating rank of a VAR process with a structural shift

Helmut Lütkepohl (), Pentti Saikkonen () and Carsten Trenkler

No 2000,10, SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Abstract: Two different types of tests for the cointegrating rank of VAR processes with a deterministic shift in the level have been proposed in the literature. The first proposal is based on the LR principle using a specific Gaussian model set-up. In the second proposal the time series are adjusted for deterministic terms first and then LR type tests are applied to the adjusted series. The local power of the two types of tests is derived and compared. Moreover, the small sample size and power properties of the tests are explored. It is found that the tests based on adjusted series generally have superior local power and size properties.

Keywords: local power; test size; cointegration; vector autoregressive process; error correction model (search for similar items in EconPapers)
Date: 2000
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Related works:
Journal Article: Comparison of tests for the cointegrating rank of a VAR process with a structural shift (2003) Downloads
Working Paper: Comparison of Tests for the Cointegrating Rank of a VAR Process with a Structural Shift (2000) Downloads
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