cointegration_johansen: Johansen Procedure for VAR

In feasts: Feature Extraction and Statistics for Time Series

Johansen Procedure for VAR

Description

Conducts the Johansen procedure on a given data set. The "trace" or "eigen" statistics are reported and the matrix of eigenvectors as well as the loading matrix.

Usage

cointegration_johansen(x, ...)

Arguments

x	Data matrix to be investigated for cointegration.
...	Additional arguments passed to urca::ca.jo().

Details

Given a general VAR of the form:

\bold{X}_t = \bold{\Pi}_1 \bold{X}_{t-1} + \dots + \bold{\Pi}_k \bold{X}_{t-k} + \bold{\mu} + \bold{\Phi D}_t + \bold{\varepsilon}_t , \quad (t = 1, \dots, T),

the following two specifications of a VECM exist:

\Delta \bold{X}_t = \bold{\Gamma}_1 \Delta \bold{X}_{t-1} + \dots + \bold{\Gamma}_{k-1} \Delta \bold{X}_{t-k+1} + \bold{\Pi X}_{t-k} + \bold{\mu} + \bold{\Phi D}_t + \bold{\varepsilon}_t

where

\bold{\Gamma}_i = - (\bold{I} - \bold{\Pi}_1 - \dots - \bold{\Pi}_i), \quad (i = 1, \dots , k-1),

and

\bold{\Pi} = -(\bold{I} - \bold{\Pi}_1 - \dots - \bold{\Pi}_k)

The \bold{\Gamma}_i matrices contain the cumulative long-run impacts, hence if spec="longrun" is choosen, the above VECM is estimated.

The other VECM specification is of the form:

\Delta \bold{X}_t = \bold{\Gamma}_1 \Delta \bold{X}_{t-1} + \dots + \bold{\Gamma}_{k-1} \Delta \bold{X}_{t-k+1} + \bold{\Pi X}_{t-1} + \bold{\mu} + \bold{\Phi D}_t + \bold{\varepsilon}_t

where

\bold{\Gamma}_i = - (\bold{\Pi}_{i+1} + \dots + \bold{\Pi}_k), \quad(i = 1, \dots , k-1),

and

\bold{\Pi} = -(\bold{I} - \bold{\Pi}_1 - \dots - \bold{\Pi}_k).

The \bold{\Pi} matrix is the same as in the first specification. However, the \bold{\Gamma}_i matrices now differ, in the sense that they measure transitory effects, hence by setting spec="transitory" the second VECM form is estimated. Please note that inferences drawn on \bold{\Pi} will be the same, regardless which specification is choosen and that the explanatory power is the same, too.

If "season" is not NULL, centered seasonal dummy variables are included.

If "dumvar" is not NULL, a matrix of dummy variables is included in the VECM. Please note, that the number of rows of the matrix containing the dummy variables must be equal to the row number of x.

Critical values are only reported for systems with less than 11 variables and are taken from Osterwald-Lenum.

Value

An object of class ca.jo.

Author(s)

Bernhard Pfaff

References

Johansen, S. (1988), Statistical Analysis of Cointegration Vectors, Journal of Economic Dynamics and Control, 12, 231–254.

Johansen, S. and Juselius, K. (1990), Maximum Likelihood Estimation and Inference on Cointegration – with Applications to the Demand for Money, Oxford Bulletin of Economics and Statistics, 52, 2, 169–210.

Johansen, S. (1991), Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models, Econometrica, Vol. 59, No. 6, 1551–1580.

Osterwald-Lenum, M. (1992), A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics, Oxford Bulletin of Economics and Statistics, 55, 3, 461–472.

See Also

urca::ca.jo()

Examples

cointegration_johansen(cbind(mdeaths, fdeaths))

feasts documentation built on Sept. 30, 2024, 9:14 a.m.