An I(2) Cointegration Model with Piecewise Linear Trends: Likelihood Analysis and Application
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An I(2) Cointegration Model with Piecewise Linear Trends : Likelihood Analysis and Application. / Kurita, Takamitsu; Nielsen, Heino Bohn; Rahbek, Anders Christian.
Department of Economics, University of Copenhagen, 2009.Research output: Working paper › Research
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TY - UNPB
T1 - An I(2) Cointegration Model with Piecewise Linear Trends
T2 - Likelihood Analysis and Application
AU - Kurita, Takamitsu
AU - Nielsen, Heino Bohn
AU - Rahbek, Anders Christian
N1 - JEL classification: C32
PY - 2009
Y1 - 2009
N2 - This paper presents likelihood analysis of the I(2) cointegrated vector autoregression with piecewise linear deterministic terms. Limiting behavior of the maximum likelihood estimators are derived, which is used to further derive the limiting distribution of the likelihood ratio statistic for the cointegration ranks, extending the result for I(2) models with a linear trend in Nielsen and Rahbek (2007) and for I(1) models with piecewise linear trends in Johansen, Mosconi, and Nielsen (2000). The provided asymptotic theory extends also the results in Johansen, Juselius, Frydman, and Goldberg (2009) where asymptotic inference is discussed in detail for one of the cointegration parameters. To illustrate, an empirical analysis of US consumption, income and wealth, 1965 - 2008, is performed, emphasizing the importance of a change in nominal price trends after 1980.
AB - This paper presents likelihood analysis of the I(2) cointegrated vector autoregression with piecewise linear deterministic terms. Limiting behavior of the maximum likelihood estimators are derived, which is used to further derive the limiting distribution of the likelihood ratio statistic for the cointegration ranks, extending the result for I(2) models with a linear trend in Nielsen and Rahbek (2007) and for I(1) models with piecewise linear trends in Johansen, Mosconi, and Nielsen (2000). The provided asymptotic theory extends also the results in Johansen, Juselius, Frydman, and Goldberg (2009) where asymptotic inference is discussed in detail for one of the cointegration parameters. To illustrate, an empirical analysis of US consumption, income and wealth, 1965 - 2008, is performed, emphasizing the importance of a change in nominal price trends after 1980.
KW - Faculty of Social Sciences
KW - US consumption
M3 - Working paper
BT - An I(2) Cointegration Model with Piecewise Linear Trends
PB - Department of Economics, University of Copenhagen
ER -
ID: 13458301