2000-06-01Zeitschriftenartikel DOI: 10.18452/27793
Testing for the cointegrating rank of a var process with an intercept
Testing the cointegrating rank of a vector autoregressive process with an intercept is considered. In addition to the likelihood ratio (LR) tests developed by Johansen and Juselius (1990, Oxford Bulletin of Economics and Statistics, 52, 169–210) and others we also consider an alternative class of tests that is based on estimating the trend parameters of the deterministic term in a different way. The asymptotic local power of these tests is derived and compared to that of the corresponding LR tests. The small sample properties are investigated by simulations. The new tests are seen to be substantially more powerful than conventional LR tests.
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This publication is with permission of the rights owner freely accessible due to an Alliance licence and a national licence (funded by the DFG, German Research Foundation) respectively.