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Title:On the small sample properties of weak exogeneity tests in cointegrated VAR models PDF Logo
Authors:Brüggemann, Ralf
Issue Date:2002
Series/Report no.:Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2002,2
Abstract:We investigate the small sample properties of two types of weak exogeneity tests in cointegrated VAR models that are frequently used in applied work. The first one is the standard Likelihood Ratio (LR) test in the Johansen framework. The second test is based on mapping the cointegrated VAR model into VECM representation and then reducing the model using some model selection procedure before testing the significance of the alpha parameters. Results from Monte Carlo experiments indicate severe size distortions in both test types in small samples. We suggest a bootstrap version of the LR test, which can be used for size correction.
weak exogeneity
bootstrap test
Subset VECM
Persistent Identifier of the first edition:urn:nbn:de:kobv:11-10048463
Document Type:Working Paper
Appears in Collections:Discussion Papers, SFB 373, HU Berlin

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