Identifying, estimating and testing restricted cointegrated systems: An overview |
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Authors: | H Peter Boswijk Jurgen A Doornik |
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Institution: | Universiteit van Amsterdam, Department of Quantitative Economics, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands;and University of Oxford, Nuffield College, Oxford OX1 1NF, United Kingdom |
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Abstract: | The notion of cointegration has led to a renewed interest in the identification and estimation of structural relations among economic time series. This paper reviews the different approaches that have been put forward in the literature for identifying cointegrating relationships and imposing (possibly over-identifying) restrictions on them. Next, various algorithms to obtain (approximate) maximum likelihood estimates and likelihood ratio statistics are reviewed, with an emphasis on so-called switching algorithms. The implementation of these algorithms is discussed and illustrated using an empirical example. |
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Keywords: | identification error correction models maximum likelihood likelihood ratio test asymptotic mixed normal distribution money demand |
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