Autori
LUETKEPOHL, Helmut
SAIKKONEN, Pentti
TRENKLER, Carsten

Titolo
Testing for the Cointegrating Rank of a VAR Process with Level Shift and Trend Break
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 2006 - Fascicolo: 29 - Pagina iniziale: 1 - Pagina finale: 31

A test for the cointegrating rank of a vector autoregressive (VAR) process with a possible shift and broken linear trend is proposed. The break point is assumed to be known. The setup is a VAR process for cointegrated variables. The tests are not likelihood ratio tests but the deterministic terms including the broken trends are removed ¯rst by a GLS proce- dure and a likelihood ratio type test is applied to the adjusted series. The asymptotic null distribution of the test is derived and it is shown by a Monte Carlo experiment that the test has better small sample properties in many cases than a corresponding Gaussian likelihood ratio test for the cointegrating rank.




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