Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/62164
Authors: 
Lütkepohl, Helmut
Saikkonen, Pentti
Trenkler, Carsten
Year of Publication: 
2000
Series/Report no.: 
Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2000,10
Abstract: 
Two different types of tests for the cointegrating rank of VAR processes with a deterministic shift in the level have been proposed in the literature. The first proposal is based on the LR principle using a specific Gaussian model set-up. In the second proposal the time series are adjusted for deterministic terms first and then LR type tests are applied to the adjusted series. The local power of the two types of tests is derived and compared. Moreover, the small sample size and power properties of the tests are explored. It is found that the tests based on adjusted series generally have superior local power and size properties.
Subjects: 
local power
test size
cointegration
vector autoregressive process
error correction model
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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