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Testing Cointegration Rank in Large Systems

Author

Listed:
  • Chen Pu

    (Universität Bielefeld → Fakultät für Wirtschaftswissenschaften)

  • Hsiao Chihying

    (Universität Bielefeld → Fakultät für Wirtschaftswissenschaften)

Abstract
In this paper we investigate the possibility of the application of subsampling procedure for testing cointegration relations in large multivariate systems. The subsampling technique is applied to overcome the difficulty of nonstandard distribution and nuisance parameters in testing for cointegration rank without an explicitly formulated structural model. The contribution in this paper is twofold: theoretically this paper shows that the subsampling testing procedure is consistent and asymptotically most powerful; practically this paper demonstrates that the subsampling procedure can be applied to determine the cointegration rank in large scale models, where the standard procedures hits already its limit. Especially for the cases of few stochastic trends in a system, the subsampling procedure shows robust and reliable results.

Suggested Citation

  • Chen Pu & Hsiao Chihying, 2005. "Testing Cointegration Rank in Large Systems," Econometrics 0504002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpem:0504002
    Note: Type of Document - pdf; pages: 30
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/em/papers/0504/0504002.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cointegration; Large System; Nonparametric Tests; Subsampling; PPP;
    All these keywords.

    JEL classification:

    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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