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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Conditional Heteroskedasticity-Robust Testing for Cointegration

Vol.21, No.4, December , 20–46


English Version |  Korean Version
  •   (Department of Food and Resource Economics, Korea University)

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Abstract  

This paper considers conditional heteroskedasticity-robust testing for cointegration in nonstationary vector autoregressive models under conditional heteroskedasticity. The likelihood ratio (LR) cointegration tests of Johansen (1988, 1991) assume the Gaussian independent and identically distributed innovations, and hence the stylized facts of time-variant and persistent volatility may affect the performance of the tests. In this paper, we allow for conditionally heteroskedastic innovations and formulate the Wald test statistics. The asymptotic distribution of the Wald tests is shown to follow the nonstandard distribution. The simulation evidence regarding the performance of the proposed tests demonstrates robustness to persistent conditional volatility.


Keywords
   Cointegration, Conditional heteroskedasticity, Robustness, VAR, Volatility

JEL classification codes
   C12, C32
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