Publication: Asymptotic inference results for multivariate long-memory processes
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2004
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Blackwell
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Abstract
In this paper, we extend the well-known Sims, Stock and Watson (SSW)(Sims et al. 1990; Econometrica 56, 113?44), analysis on estimation and testing in vector autoregressive process (VARs) with integer unit roots and deterministic components to a more general set-up where non-stationary fractionally integrated (NFI) processes are considered. In particular, we focus on partial VAR models where the conditioning variables are NFI since this is the only finite-lag VAR model compatible with such processes. We show how SSW?s conclusions remain valid. This means that whenever a block of coefficients in the partial VAR can be written as coefficients on zero-mean I(0) regressors in models including a constant term, they will have a joint asymptotic normal distribution. Monte Carlo simulations and an empirical application of our theoretical results are also provided.
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Vector fractionally integrated processes, Fractional cointegration, Granger causality, Permanent income hypothesis
Bibliographic citation
The Econometrics Journal, 2004, 7, 1, p. 168-190