Testing for vector autoregressive dynamics under heteroskedasticity
Christian M. Hafner and
Helmut Herwartz
No 2003,4, SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
Abstract:
In this paper we introduce a bootstrap procedure to test parameter restrictions in vector autoregressive models which is robust in cases of conditionally heteroskedastic error terms. The adopted wild bootstrap method does not require any parametric specification of the volatility process and takes contemporaneous error correlation implicitly into account. Via a Monte Carlo investigation empirical size and power properties of the new method are illustrated. We compare the bootstrap approach with standard procedures either ignoring heteroskedasticity or adopting a spirit of the White correction. In terms of empirical size the proposed method clearly outperforms competing approaches without paying any price in terms of size adjusted power. We apply the alternative tests to investigate the potential of causal relationships linking daily prices of natural gas and crude oil. Unlike standard inference ignoring time varying error variances, heteroskedasticity consistent test procedures do not deliver any evidence in favor of short run causality between the two series.
Keywords: heteroskedasticity; bootstrap; vector autoregression; hypothesis testing; causality; energy markets (search for similar items in EconPapers)
JEL-codes: C12 C32 (search for similar items in EconPapers)
Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
https://www.econstor.eu/bitstream/10419/66291/1/730066762.pdf (application/pdf)
Related works:
Working Paper: Testing for vector autoregressive dynamics under heteroskedasticity (2002) 
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:zbw:sfb373:20034
Access Statistics for this paper
More papers in SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().