6533b7d8fe1ef96bd126a1be

RESEARCH PRODUCT

Tests against stationary and explosive alternatives in vector autoregressive models

Jukka NyblomNiklas Ahlgren

subject

Statistics and ProbabilityAutoregressive modelExplosive materialRank (linear algebra)Applied MathematicsLikelihood-ratio testCompanion matrixEconometricsUnit rootStatistics Probability and UncertaintyEigenvalues and eigenvectorsMathematicsStatistical hypothesis testing

description

.  The article proposes new tests for the number of unit roots in vector autoregressive models based on the eigenvalues of the companion matrix. Both stationary and explosive alternatives are considered. The limiting distributions of test statistics depend only on the number of unit roots. Size and power are investigated, and it is found that the new test against some stationary alternatives compares favourably with the widely used likelihood ratio test for the cointegrating rank. The powers are prominently higher against explosive than against stationary alternatives. Some empirical examples are provided to show how to use the new tests with real data.

yearjournalcountryeditionlanguage
2008-05-01Journal of Time Series Analysis
https://doi.org/10.1111/j.1467-9892.2007.00560.x