Testing for Cointegration Rank Using Bayes Factors
نویسنده
چکیده
This paper proposes Bayesian methods for estimating the cointegration rank using Bayes factors. We consider natural conjugate priors for computing Bayes factors. First, we estimate the cointegrating vectors for each possible rank. Then, we compute the Bayes factors for each rank against 0 rank. Monte Carlo simulations show that using Bayes factor with conjugate priors produces fairly good results. We apply the method to demand for money in the US.
منابع مشابه
Bayesian Cointegration Analysis
This paper proposes Bayesian estimation of cointegrated VAR systems and a simple method of estimating the cointegration rank using the Bayes factors for the adjustment term. Monte Carlo experiments show that the method proposed is more powerful in selecting the rank, especially with a small sample size, than Johansen's LR test. This is due to the fact that Bayesian analysis uses the exact distr...
متن کاملA Bootstrap Test of Cointegration Rank
This paper suggests a bootstrap testing procedure for determining the rank of cointegrated systems. The properties of the new testing procedure are investigated using Monte Carlo techniques. The performance of the test compares favourably to that of the widely used procedures for determining cointegration rank proposed by Johansen (1988). JEL classi cation: C12; C15; C32.
متن کاملBayes Estimators of the Cointegration Space
A neglected aspect of the otherwise fairly well developed Bayesian analysis of cointegration is the point estimation of the cointegration space. It is pointed out here that, due to the well known non-identification of the cointegration vectors, the parameter space is not an inner product space and conventional Bayes estimators therefore stand without their usual decision theoretic foundation. W...
متن کاملEstimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected].. The Econometric Society is collaborating with JSTOR to di...
متن کاملBootstrap and fast double bootstrap tests of cointegration rank with financial time series
The likelihood ratio test of cointegration rank is the most widely used test for cointegration. Many studies have shown by simulation that the small sample distribution is not well approximated by the limiting distribution. We suggest using the bootstrap to generate small sample critical values instead of correcting the test statistics. The idea of bootstrapping the trace test of cointegration ...
متن کامل