Likelihood-Based Cointegration Analysis in Panels of Vector Error Correction Models

Arbeitspapier

We propose in this paper a likelihood-based framework forcointegration analysis in panels of a fixed number of vector errorcorrection models. Maximum likelihood estimators of thecointegrating vectors are constructed using iterated GeneralizedMethod of Moments estimators. Using these estimators we constructlikelihood ratio statistics to test for a common cointegrationrank across the individual vector error correction models, bothwith heterogeneous and homogeneous cointegrating vectors. Thecorresponding limiting distributions are a summation of thelimiting behavior of Johansen (1991) trace statistics. We alsoincorporate both unrestricted and restricted deterministiccomponents which are either homogeneous or heterogeneous. Theproposed framework is applied on a data set of exchange rates andappropriate monetary fundamentals. The test results show strongevidence for the validity of the monetary exchange rate modelwithin a panel of vector error correction models for three majorEuropean countries, whereas the results based on individual vectorerror correction models for each of these countries separately areless supportive.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 99-055/4

Classification and Topics

• Classification: Wirtschaft
• Subject: Kointegration ; Schätzung ; Wechselkurs ; EU-Staaten ; Fehlerkorrekturmodell ; Momentenmethode

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Groen, Jan J.J. ; Kleibergen, Frank R.
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/85526
• Last update: 10.03.2025, 11:42 AM CET