- Likelihood ratio tests of restrictions on common trends loading matrices in I(2) VAR systems
- Volume | Issue number
- 5 | 3
- Article number
- Number of pages
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
- Likelihood ratio tests of over-identifying restrictions on the common trends loading matrices in I(2) VAR systems are discussed. It is shown how hypotheses on the common trends loading matrices can be translated into hypotheses on the cointegration parameters. Algorithms for (constrained) maximum likelihood estimation are presented, and asymptotic properties sketched. The techniques are illustrated using the analysis of the PPP and UIP between Switzerland and the US.
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- In Special Issue Recent Developments in Cointegration
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