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COINTEGRATION IN LARGE VARS

Publication ,  Journal Article
Bykhovskaya, A; Gorin, V
Published in: Annals of Statistics
June 1, 2022

The paper analyzes cointegration in vector autoregressive processes (VARs) for the cases when both the number of coordinates, N, and the number of time periods, T, are large and of the same order. We propose a way to examine a VAR of order 1 for the presence of cointegration based on a modification of the Johansen likelihood ratio test. The advantage of our procedure over the original Johansen test and its finite sample corrections is that our test does not suffer from overrejection. This is achieved through novel asymptotic theorems for eigenvalues of matrices in the test statistic in the regime of proportionally growing N and T. Our theoretical findings are supported by Monte Carlo simulations and an empirical illustration. Moreover, we find a surprising connection with multivariate analysis of variance (MANOVA) and explain why it emerges.

Duke Scholars

Published In

Annals of Statistics

DOI

EISSN

2168-8966

ISSN

0090-5364

Publication Date

June 1, 2022

Volume

50

Issue

3

Start / End Page

1593 / 1617

Related Subject Headings

  • Statistics & Probability
  • 4905 Statistics
  • 3802 Econometrics
  • 1403 Econometrics
  • 0104 Statistics
  • 0102 Applied Mathematics
 

Citation

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ICMJE
MLA
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Bykhovskaya, A., & Gorin, V. (2022). COINTEGRATION IN LARGE VARS. Annals of Statistics, 50(3), 1593–1617. https://doi.org/10.1214/21-AOS2164
Bykhovskaya, A., and V. Gorin. “COINTEGRATION IN LARGE VARS.” Annals of Statistics 50, no. 3 (June 1, 2022): 1593–1617. https://doi.org/10.1214/21-AOS2164.
Bykhovskaya A, Gorin V. COINTEGRATION IN LARGE VARS. Annals of Statistics. 2022 Jun 1;50(3):1593–617.
Bykhovskaya, A., and V. Gorin. “COINTEGRATION IN LARGE VARS.” Annals of Statistics, vol. 50, no. 3, June 2022, pp. 1593–617. Scopus, doi:10.1214/21-AOS2164.
Bykhovskaya A, Gorin V. COINTEGRATION IN LARGE VARS. Annals of Statistics. 2022 Jun 1;50(3):1593–1617.

Published In

Annals of Statistics

DOI

EISSN

2168-8966

ISSN

0090-5364

Publication Date

June 1, 2022

Volume

50

Issue

3

Start / End Page

1593 / 1617

Related Subject Headings

  • Statistics & Probability
  • 4905 Statistics
  • 3802 Econometrics
  • 1403 Econometrics
  • 0104 Statistics
  • 0102 Applied Mathematics