Testing for the Cointegrating Rank of a VAR Process With Structural Shifts |
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Authors: | Pentti Saikkonen Helmut Lütkepohl |
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Affiliation: | 1. Department of Statistics , University of Helsinki , FIN-00014 University of Helsinki, Finland E-mail: saikkone@valthelsinki.fi;2. Institut für Statistik und ?konometrie, Wirtschaftswissenschaftliche Fakult?t, Humboldt-University , 10178 , Berlin , Germany E-mail: luetke@wiwi.hu-beriin.de |
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Abstract: | Tests for the cointegrating rank of a vector autoregressive process are considered that allow for possible exogenous shifts in the mean of the data-generation process. The break points are assumed to be known a priori. It is proposed to estimate and remove the deterministic terms such as mean, linear-trend term, and a shift in a first step. Then systems cointegration tests are applied to the adjusted series. The resulting tests are shown to have known limiting null distributions that are free of nuisance parameters and do not depend on the break point. The tests are applied for analyzing the number of cointegrating relations in two German money-demand systems. |
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Keywords: | Cointegration Money-demand analysis Testing for cointegration Vector autoregressive process |
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