The present paper employs the infinite order error correction representation of the observables of a I(1) state space system and analyzes by simulation the small sample behaviour of the test on rank and on the cointegrating vectors calculated via a finite order cointegrated vector autoregressive approximation. The rank test performs very well in systems with a small number of states and stochastic trends (≤4) and a medium number of observables (≤35) already for a sample of size T = 300 and it is still reliable with a large number of observables (≤140) when T = 600. The behaviour of the test on the cointegrating vectors is more problematic.

Testing for cointegration in I(1) state space systems via a finite order approximation / Franchi, Massimo. - In: ECONOMICS LETTERS. - ISSN 0165-1765. - STAMPA. - 165:(2018), pp. 73-76. [10.1016/j.econlet.2018.02.012]

Testing for cointegration in I(1) state space systems via a finite order approximation

Franchi, Massimo
2018

Abstract

The present paper employs the infinite order error correction representation of the observables of a I(1) state space system and analyzes by simulation the small sample behaviour of the test on rank and on the cointegrating vectors calculated via a finite order cointegrated vector autoregressive approximation. The rank test performs very well in systems with a small number of states and stochastic trends (≤4) and a medium number of observables (≤35) already for a sample of size T = 300 and it is still reliable with a large number of observables (≤140) when T = 600. The behaviour of the test on the cointegrating vectors is more problematic.
2018
state space systems
01 Pubblicazione su rivista::01a Articolo in rivista
Testing for cointegration in I(1) state space systems via a finite order approximation / Franchi, Massimo. - In: ECONOMICS LETTERS. - ISSN 0165-1765. - STAMPA. - 165:(2018), pp. 73-76. [10.1016/j.econlet.2018.02.012]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/1069114
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