An invariance property of the common trends under linear transformations of the data

Søren Johansen, Katarina Juselius

    Publikation: Working paper/Preprint Working paperForskning

    241 Downloads (Pure)

    Abstract

    It is well known that if X(t) is a nonstationary process and Y(t) is a linear function of X(t), then cointegration of Y(t) implies cointegration of X(t). We want to find an analogous result for common trends if X(t) is generated by a finite order VAR. We first show that Y(t) has an infinite order VAR representation in terms of its prediction errors, which are a linear process in the prediction error for X(t). We then apply this result to show that the limit of the common trends for Y(t) are linear functions of the common trends for X(t).
    OriginalsprogEngelsk
    UdgivelsesstedAarhus
    UdgiverInstitut for Økonomi, Aarhus Universitet
    Antal sider14
    StatusUdgivet - 2010

    Fingeraftryk

    Dyk ned i forskningsemnerne om 'An invariance property of the common trends under linear transformations of the data'. Sammen danner de et unikt fingeraftryk.

    Citationsformater