This paper considers cointegration tests for dynamic systems where the number of variables is large relative to the sample size. Typical examples include tests for unit roots in panels where the units are linked by complicated dynamic relationships. It is well known that conventional cointegration tests based on a parametric (vector autoregressive) representation of the system break down if the...

This article investigates the forward market efficiency by testing the unbiased forward exchange rate hypothesis using nine currencies vis-à-vis the U.S. dollar. The empirical tests are conducted using monthly data during the period between January 1985 and December 1996 and two different methods of cointegration tests, a fractional (GPH) test and the HarrisInder test. The two cointegration tes...

This paper develops an analysis of budget deficit financing in termsof a crowding out or crowding in effect on the activity of the privatesector for the economies of Iran and Algeria as two MENA countries,(because of its economic structures (dependence on oil revenue)) duringthe period 1970-2012 by using Cointegration and Vector ErrorCorrection approaches. The analysis confirms the existence of...

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 ...

We propose a new transaction-level bivariate log-price model, which yields fractional or standard cointegration. To the best of our knowledge, all existing models for cointegration require the choice of a fixed sampling interval ∆t. By contrast, our proposed model is constructed at the transaction level, thus determining the properties of returns at all sampling frequencies. The two ingredients...

In this paper, cointegration relationships among 26 global stock market indices over the periods of sub-prime and European debt crisis and their influence rank are investigated by constructing and analyzing directed and weighted cointegration networks. The obtained results are shown as follows: the crises have changed cointegration relationships among stock market indices, their cointegration r...

The distribution of a functional of two correlated vector Brownian motions is approximated by a Gamma distribution. This functional represents the limiting distribution for cointegration tests with stationary exogenous regressors, but also for cointegration tests based on a non-Gaussian likelihood. The approximation is accurate, fast, and easy to use in comparison to both tabulated critical val...

This paper studies the effects of increasing the frequency of observation and the data span on the Johansen cointegration tests. The ability of the tests to detect cointegration depends more on the total sample length than the number of observations.  2000 Elsevier Science S.A. All rights reserved.