Bootstrap inference in systems of single equation error correction models |
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| Institution: | 1. Institute of Statistics and Econometrics, Christian Albrechts University Kiel, Ohlshausenstr. 40, D-24098 Kiel, Germany;2. Institute of Mathematical Stochastics, Technical University Braunschweig, Pockelsstraße 14, D-38106 Braunschweig, Germany;1. Nano Material and Device Laboratory, Department of Applied Physics, Visvesvaraya National Institute of Technology, South Ambazari Road, Nagpur 440010, MS, India;2. Thin Film and Nano Science Laboratory, Department of Physics, School of Physical Sciences, North Maharashtra University, Jalgaon 425 001, MS, India;3. Technische Universität Chemnitz, Institut für Chemie, AG Elektrochemie, D-09107 Chemnitz, Germany;4. Department of Organic and Nano Engineering, Institute of Nano-Science and Technology, Hanyang University, 17 Haengdang-dong, Seongdong-gu, Seoul 133-791, South Korea;1. Laboratório de Transferência de Massa e Simulação Numérica de Sistemas Químicos, Federal University of Santa Catarina, PO Box 476, CEP 88040-900 Florianópolis, SC, Brazil;2. LSRE, Laboratory of Separation and Reaction Engineering, Associate Laboratory LSRE/LCM, Faculty of Engineering, University of Porto, Rua Dr. Roberto Frias, 4200-465 Porto, Portugal;1. Université Paris-Est, Laboratoire Navier (UMR CNRS - IFSTTAR - ENPC), IFSTTAR, 6-8, av. Bl. Pascal, F-77455 Marne-la-Vallée, France;2. Laboratory of Industrial and Pollution Chemistry, Department of Applied Chemistry, ENSAI, University of Ngaoundéré, BP 455 Ngaoundéré, Cameroon;3. Université Paris-Est, Laboratoire de Géomatériaux et Environnement, 5 Bd Descartes, 77545 Marne-la-Vallée, Cedex 2, France;4. Angewandte Geologie, Universität Göttingen, Goldschmidtstraße 3, D-37077 Göttingen, Germany;5. Kultur und Nachhaltige Entwicklung CDD e.V., Postfach 1502, D-37005 Göttingen, Germany;6. Comité Afro-européen, Avenue Léopold II, 41, 5000 Namur, Belgium;1. Dalian Polytechnic University, Dalian 116034, China.;2. State Key Laboratory of Microbial Technology, Shandong University, Jinan 250100, China.;1. State Key Laboratory of Coal Conversion, Institute of Coal Chemistry, Chinese Academy of Sciences, Taiyuan 030001, PR China;2. University of Chinese Academy of Sciences, Beijing 100049, PR China |
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| Abstract: | We analyze OLS-based tests of long-run relationships, weak exogeneity and short-run dynamics in conditional error correction models. Unweighted sums of single equation test statistics are used for hypothesis testing in pooled systems. When model errors are (conditionally) heteroskedastic tests of weak exogeneity and short run dynamics are affected by nuisance parameters. Similarly, on the pooled level the advocated test statistics are no longer pivotal in presence of cross-sectional error correlation. We prove that the wild bootstrap provides asymptotically valid critical values under both conditional heteroskedasticity and cross-sectional error correlation. A Monte-Carlo study reveals that in small samples the bootstrap outperforms first-order asymptotic approximations in terms of the empirical size even if the asymptotic distribution of the test statistic does not depend on nuisance parameters. Opposite to feasible GLS methods the approach does not require any estimate of cross-sectional correlation and copes with time-varying patterns of contemporaneous error correlation. |
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