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dc.contributor.authorDEMETRESCU, Matei
dc.contributor.authorLUETKEPOHL, Helmut
dc.contributor.authorSAIKKONEN, Pentti
dc.date.accessioned2008-06-05T08:43:24Z
dc.date.available2008-06-05T08:43:24Z
dc.date.issued2008
dc.identifier.issn1725-6704
dc.identifier.urihttp://hdl.handle.net/1814/8769
dc.description.abstractWhen applying Johansen's procedure for determining the coin- tegrating rank to systems of variables with linear deterministic trends, there are two possible tests to choose from. One test allows for a trend in the cointegration relations and the other one restricts the trend to be orthogonal to the cointegration relations. The first test is known to have reduced power relative to the second one if there is in fact no trend in the cointegration re- lations, whereas the second one is based on a misspecified model if the linear trend is not orthogonal to the cointegration relations. Hence, the treatment of the linear trend term is crucial for the outcome of the rank determination procedure. We compare two alternative testing strategies which are appli- cable if there is uncertainty regarding the proper trend specification. In the first one a specific cointegrating rank is rejected if one of the two tests rejects and in the second one the trend term is decided upon by a pretest. The first strategy is shown to be preferable in applied work.en
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.publisherEuropean University Institute
dc.relation.ispartofseriesEUI ECOen
dc.relation.ispartofseries2008/24en
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectCointegration analysisen
dc.subjectlikelihood ratio testen
dc.subjectvector autoregressive modelen
dc.subjectvector error correction modelen
dc.subjectC32en
dc.subjectAR-GARCHen
dc.subjectasymptotic normalityen
dc.subjectconsistencyen
dc.subjectnonlinear time seriesen
dc.subjectquasi maximum likelihood estimationen
dc.titleTesting for the Cointegrating Rank of a Vector Autoregressive Process with Uncertain Deterministic Trend Termen
dc.typeWorking Paperen
dc.neeo.contributorDEMETRESCU|Matei|aut|
dc.neeo.contributorLUETKEPOHL|Helmut|aut|EUI70007
dc.neeo.contributorSAIKKONEN|Pentti|aut|
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