Published in:ESSEC Business School Working Paper 1320
Extent:
1 Online-Ressource (42 p)
Language:
English
DOI:
10.2139/ssrn.2364363
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 2013 erstellt
Description:
Standard tests for the rank of cointegration of a vector autoregressive process present distributions that are affected by the presence of deterministic trends. We consider the recent approach of Demetrescu et al. (2009) who recommend testing a composite null. We assess this methodology in the presence of trends (linear or broken) whose magnitude is small enough not to be detectable at conventional significance levels. We model them using local asymptotics and derive the properties of the test statistics. We show that whether the trend is orthogonal to the cointegrating vector has a major impact on the distributions but that the test combination approach remains valid. We apply of the methodology to the study of cointegration properties between global temperatures and the radiative forcing of human gas emissions. We find new evidence of Granger Causality