Piotr Kębłowski
ARTICLE

(Polish) PDF

ABSTRACT

Performance of small-sample cointegration rank tests is investigated within the framework of a VEC model with skewed fat-tailed error distribution. The Monte Carlo analysis is conducted for: asymptotic test, tests with degrees-of-freedom corrections, test with Bartlett correction, bootstrap test, and bootstrap test with Bartlett correction, as a surrogate of double bootstrap test. The results indicate that the smallsample cointegration rank tests are robust to skewed fat-tailed error distribution, approximated by SU Johnson distribution, with respect to size and power of these tests.

KEYWORDS

fat-tailed error distribution, SU Johnson distribution, small sample inference, cointegration rank

REFERENCES

[1] Cheung Y.-W., Lai K. S., (1993), Finite-Sample Sizes of Johansen’s Likelihood Ratio Tests for Cointegration, Oxford Bulletin of Economics and Statistics, 55, 313–328.

[2] Edgeworth F. Y., (1898), On the Representation of Statistics by Mathematical Formulae, Journal of the Royal Statistical Society, 61, 670–700.

[3] Gonzalo J., (1994), Five Alternative Methods of Estimating Long-Run Equilibrium Relationships, Journal of Econometrics, 60, 203–233.

[4] Hansen H., Rahbek A., (2002), Approximate Conditional Unit Root Inference, Journal of Time Series Analysis, 23, 1–28.

[5] Johansen S., (1988), Statistical Analysis of Cointegration Vectors, Journal of Economic Dynamics and Control, 12, 231–254.

[6] Johansen S., (1996), Likelihood-Based Inference in Cointegrated Vector Autoregressive Models, Oxford University Press, Oxford.

[7] Johansen S., (2002), A Small Sample Correction for the Test of Cointegrating Rank in the Vector Autoregressive Model, Econometrica, 70, 1929–1961.

[8] Johansen S., Mosconi R., Nielsen B., (2000), Cointegration Analysis in the Presence of Structural Breaks in the Deterministic Trend, Econometrics Journal, 3, 216–249.

[9] Johnson N. L., (1949), Systems of Frequency Curves Generated by Methods of Translation, Biometrika, 36, 149–176.

[10] Kębłowski P., (2009), Małopróbkowe wnioskowanie o rzędzie kointegracji, rozprawa doktorska.

[11] Kębłowski P., (2013), Właściwości metod małopróbkowego wnioskowania o rzędzie kointegracji, Przegląd Statystyczny, 60 (2), 163–185.

[12] Kębłowski P., Welfe A., (2010), Estimation of the Equilibrium Exchange Rate: The CHEER Approach, Journal of International Money and Finance, 29 (8), 1385–1397.

[13] Pajor A., (2006), Bivariate Bayesian VECM-SV Models for Polish Exchange Rates, Przegląd Statystyczny, 53 (3), 9–26.

[14] Reimers H.-E., (1992), Comparisons of Tests for Multivariate Cointegration, Statistical Papers, 33, 335–359.

[15] Reinsel G. C., Ahn S. K., (1989), Likelihood Ratio Test for Unit Roots and Forecasting Properties in the Nonstationary Vector AR Model, materiał powielony.

[16] Reinsel G. C., Ahn S. K., (1992), Vector AR Models with Unit Roots and Reduced Rank Structure: Estimation, Likelihood Ratio Test, and Forecasting, Journal of Time Series Analysis, 13, 353–375.

[17] Swensen A. R., (2006), Bootstrap Algorithms for Testing and Determining the Cointegration Rank in VAR Models, Econometrica, 74, 1699–1714.

[18] Toda H. Y., (1994), Finite Sample Properties of Likelihood Ratio Tests for Cointegrating Ranks when Linear Trends are Present, The Review of Economics and Statistics, 76, 66–79.

[19] Toda H. Y., (1995), Finite Sample Performance of Likelihood Ratio Tests for Cointegrating Ranks in Vector Autoregressions, Econometric Theory, 11, 1015–1032.

Back to top
Copyright © 2019 Statistics Poland