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ANALYSIS OF COEXPLOSIVE PROCESSES

  • Bent Nielsen (a1)
  • DOI: http://dx.doi.org/10.1017/S0266466609990144
  • Published online: 01 October 2009
Abstract

A vector autoregressive model allowing for unit roots as well as an explosive characteristic root is developed. The Granger-Johansen representation shows that this results in processes with two common features: a random walk and an explosively growing process. Cointegrating and coexplosive vectors can be found that eliminate these common factors. The likelihood ratio test for a simple hypothesis on the coexplosive vectors is analyzed. The method is illustrated using data from the extreme Yugoslavian hyperinflation of the 1990s.

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*Address correspondence to Bent Nielsen, Nuffield College, Oxford OX1 1NF, UK; e-mail: bent.nielsen@nuffield.ox.ac.uk.
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Econometric Theory
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