Abstract
This paper provides pseudo-Gaussian and locally optimal rank-based tests for the cointegration rank in linear cointegrated error-correction models with common trends and i.i.d. elliptical innovations. The proposed tests are asymptotically distribution-free, hence their validity does not depend on the actual distribution of the innovations. The proposed rank-based tests depend on the choice of scores, associated with a reference density that can freely be chosen. Under appropriate choices they are achieving the semiparametric efficiency bounds; when based on Gaussian scores, they moreover uniformly dominate their pseudo-Gaussian counterparts. Simulations show that the asymptotic analysis provides an accurate approximation to finite-sample behavior. The theoretical results are based on a complete picture of the asymptotic statistical structure of the model under consideration.
Original language | English |
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Pages (from-to) | 46-61 |
Number of pages | 15 |
Journal | Journal of Econometrics |
Volume | 190 |
Issue number | 1 |
DOIs | |
Publication status | Published - 1 Jan 2016 |
Keywords
- Cointegration model
- Cointegration rank
- Elliptical densities
- Error-correction model
- Lagrange multiplier test
- Local asymptotic Brownian functional
- Local asymptotic mixed normality
- Local asymptotic normality
- Multivariate ranks
- Quasi-likelihood procedures
- Rank tests
- Semiparametric efficiency