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Media type:
E-Article
Title:
Likelihood-Based Cointegration Analysis in Panels of Vector Error-Correction Models
Contributor:
Kleibergen, Frank
Published:
American Statistical Association, 2003
Published in:
Journal of Business & Economic Statistics, 21 (2003) 2, Seite 295-318
Language:
English
ISSN:
0735-0015
Origination:
Footnote:
Description:
We propose a likelihood-based framework for cointegration analysis in panels of a fixed number of vector error-correction (VEC) models. We obtain likelihood ratio statistics to test for a common cointegration rank across the individual VEC models with both heterogeneous and homogeneous cointegrating vectors. Their limiting distributions are a summation of the limiting behavior of Johansen trace statistics. We extend the asymptotic distribution theory to cover the case of an infinite cross-sectional dimension. We apply the framework to a dataset of exchange rates and appropriate monetary fundamentals. We find evidence for the validity of the monetary exchange rate model within a panel of VEC models for three major European countries, whereas the results based on individual VEC models for each of these countries separately are less supportive.