Inference in Cointegrated VAR Systems
1993 (English)Report (Other academic)
This paper examines the asymptotic properties of the Wald statistic in vector autoregressions that may have unit roots. Within this framework, we extend the distribution theory of Sims, Stock and Watson (1990) to nonlinear restrictions. It is shown that the limiting distribution of the Wald statistic is nonstandard when the restrictions concern the constant term or constrain the cointegration or common trends spaces. To exemplify the procedure, we study constraints derived from linear(ized) rational expectations models, i.e. nonlinear cross equation restrictions. A Monte Carlo study is performed and we find that the test statistic is somewhat oversized in small samples.
Place, publisher, year, edition, pages
Stockholm: IIES , 1993. , 47 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 556
cointegration, cross equation restrictions, unit roots, vector autoregression, Wald statistic
IdentifiersURN: urn:nbn:se:su:diva-41876OAI: oai:DiVA.org:su-41876DiVA: diva2:338086