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Cointegration Testing Using Pseudolikelihood Ratio Tests

Published online by Cambridge University Press:  11 February 2009

André Lucas
André Lucas
Affiliation:
Free University Amsterdam
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Abstract

This paper considers pseudomaximum likelihood estimators for vector autoregressive models. These estimators are used to determine the cointegration rank of a multivariate time series process using pseudolikelihood ratio tests. The asymptotic distributions of these tests depend on nuisance parameters if the pseudolikelihood is non-Gaussian. This even holds if the likelihood is correctly specified. The nuisance parameters have a natural interpretation and can be consistently estimated. Some simulation results illustrate the usefulness of the tests: non-Gaussian pseudolikelihood ratio tests generally have a higher power than the Gaussian test of Johansen if the innovations demonstrate leptokurtic behavior.

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Articles
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Econometric Theory , Volume 13 , Issue 2 , April 1997 , pp. 149 - 169
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Copyright © Cambridge University Press 1997

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