This paper develops a new approach to the problem of testing the existence of a level relationship between a dependent variable and a set of regressors, when it is not known with certainty whether the underlying regressors are trend- or first-difference stationary. The proposed tests are based on standard F- and t-statistics used to test the significance of the lagged levels of the variables in a univariate equilibrium correction mechanism. The asymptotic distributions of these statistics are non-standard under the null hypothesis that there exists no level relationship, irrespective of whether the regressors are I(0) or I(1). Two sets of asymptotic critical values are provided: one when all regressors are purely I(1) and the other if they are all purely I(0). These two sets of critical values provide a band covering all possible classifications of the regressors into purely I(0), purely I(1) or mutually cointegrated. Accordingly, various bounds testing procedures are proposed. It is shown that the proposed tests are consistent, and their asymptotic distribution under the null and suitably defined local alternatives are derived. The empirical relevance of the bounds procedures is demonstrated by a re-examination of the earnings equation included in the UK Treasury macroeconometric model. Copyright © 2001 John Wiley & Sons, Ltd.

/pdf/bounds-testing-approaches-to-the-analysis-of-level-un6p8czliu.pdf

Bounds testing approaches to the analysis of level relationships

In this book, Andrew Harvey sets out to provide a unified and comprehensive theory of structural time series models. Unlike the traditional ARIMA models, structural time series models consist explicitly of unobserved components, such as trends and seasonals, which have a direct interpretation. As a result the model selection methodology associated with structural models is much closer to econometric methodology. The link with econometrics is made even closer by the natural way in which the models can be extended to include explanatory variables and to cope with multivariate time series. From the technical point of view, state space models and the Kalman filter play a key role in the statistical treatment of structural time series models. The book includes a detailed treatment of the Kalman filter. This technique was originally developed in control engineering, but is becoming increasingly important in fields such as economics and operations research. This book is concerned primarily with modelling economic and social time series, and with addressing the special problems which the treatment of such series poses. The properties of the models and the methodological techniques used to select them are illustrated with various applications. These range from the modellling of trends and cycles in US macroeconomic time series to to an evaluation of the effects of seat belt legislation in the UK.

Forecasting, Structural Time Series Models and the Kalman Filter

The author's preface gives an outline: "This book is about weakconvergence methods in metric spaces, with applications sufficient to show their power and utility. The Introduction motivates the definitions and indicates how the theory will yield solutions to problems arising outside it. Chapter 1 sets out the basic general theorems, which are then specialized in Chapter 2 to the space C[0, l ] of continuous functions on the unit interval and in Chapter 3 to the space D [0, 1 ] of functions with discontinuities of the first kind. The results of the first three chapters are used in Chapter 4 to derive a variety of limit theorems for dependent sequences of random variables. " The book develops and expands on Donsker's 1951 and 1952 papers on the invariance principle and empirical distributions. The basic random variables remain real-valued although, of course, measures on C[0, l ] and D[0, l ] are vitally used. Within this framework, there are various possibilities for a different and apparently better treatment of the material. More of the general theory of weak convergence of probabilities on separable metric spaces would be useful. Metrizability of the convergence is not brought up until late in the Appendix. The close relation of the Prokhorov metric and a metric for convergence in probability is (hence) not mentioned (see V. Strassen, Ann. Math. Statist. 36 (1965), 423-439; the reviewer, ibid. 39 (1968), 1563-1572). This relation would illuminate and organize such results as Theorems 4.1, 4.2 and 4.4 which give isolated, ad hoc connections between weak convergence of measures and nearness in probability. In the middle of p. 16, it should be noted that C*(S) consists of signed measures which need only be finitely additive if 5 is not compact. On p. 239, where the author twice speaks of separable subsets having nonmeasurable cardinal, he means "discrete" rather than "separable." Theorem 1.4 is Ulam's theorem that a Borel probability on a complete separable metric space is tight. Theorem 1 of Appendix 3 weakens completeness to topological completeness. After mentioning that probabilities on the rationals are tight, the author says it is an

Convergence of probability measures

1980 Preface * 1999 Preface * 1999 Acknowledgements * Introduction * 1 Circular Logic * 2 Phase Singularities (Screwy Results of Circular Logic) * 3 The Rules of the Ring * 4 Ring Populations * 5 Getting Off the Ring * 6 Attracting Cycles and Isochrons * 7 Measuring the Trajectories of a Circadian Clock * 8 Populations of Attractor Cycle Oscillators * 9 Excitable Kinetics and Excitable Media * 10 The Varieties of Phaseless Experience: In Which the Geometrical Orderliness of Rhythmic Organization Breaks Down in Diverse Ways * 11 The Firefly Machine 12 Energy Metabolism in Cells * 13 The Malonic Acid Reagent ('Sodium Geometrate') * 14 Electrical Rhythmicity and Excitability in Cell Membranes * 15 The Aggregation of Slime Mold Amoebae * 16 Numerical Organizing Centers * 17 Electrical Singular Filaments in the Heart Wall * 18 Pattern Formation in the Fungi * 19 Circadian Rhythms in General * 20 The Circadian Clocks of Insect Eclosion * 21 The Flower of Kalanchoe * 22 The Cell Mitotic Cycle * 23 The Female Cycle * References * Index of Names * Index of Subjects

https://www.cambridge.org/core/services/aop-cambridge-core/content/view/596B270197FE27DE5FABB598B6210622/S0025557200150892a.pdf/div-class-title-span-class-italic-the-geometry-of-biological-time-span-by-a-t-winfree-pp-544-dm68-corrected-second-printing-1990-isbn-3-540-52528-9-springer-div.pdf

The geometry of biological time , by A. T. Winfree. Pp 544. DM68. Corrected Second Printing 1990. ISBN 3-540-52528-9 (Springer)

The Theory of Matrices. By F R. Gantmacher. Two volumes, pp. 374 and 276. 1959. (Translated from the Russian by K. A. Hirsch; Chelsea Publishing Company, New York)

The likelihood ratio test for cointegrating rank is analyzed for partial (or conditional) systems in the vector autoregressive error-correction model. Under the assumption of weak exogeneity for the cointegrating parameters, the asymptotic distributions are given and tables of critical values are provided. A discussion is given of some of the assumptions of the model, why they are needed, and how they are tested.

Asymptotic Inference on Cointegrating Rank in Partial Systems

Consistency and asymptotic normality are established for the highly applied quasi-maximum likelihood estimator in the GARCH(1,1) model. Contrary to existing literature we allow the parameters to be in the region where no stationary version of the process exists. This has the important implication that the likelihood-based estimator for the GARCH parameters is consistent and asymptotically normal in the entire parameter region including both stationary and explosive behavior. In particular, there is no “knife edge result like the unit root case” as hypothesized in Lumsdaine (1996, Econometrica 64, 575–596).Anders Rahbek is grateful for support from the Danish Social Sciences Research Council, the Centre for Analytical Finance (CAF), and the EU network DYNSTOCH. Both authors thank the two anonymous referees and the editor for highly valuable and detailed comments that have, we believe, led to a much improved version of the paper, both in terms of the econometric theory and of the presentation.

Asymptotic Inference for Nonstationary GARCH

Trend stationarity in the I(2) cointegration model

We establish consistency and asymptotic normality of the quasi-maximum likelihood estimator in the linear ARCH model. Contrary to the existing literature, we allow the parameters to be in the region where no stationary version of the process exists. This implies that the estimator is always asymptotically normal.

/pdf/asymptotic-normality-of-the-qmle-estimator-of-arch-in-the-5am38d8bxt.pdf

Asymptotic normality of the qmle estimator of arch in the nonstationary case

Many key macro-economic and financial variables are characterised by permanent changes in unconditional volatility. In this paper we analyse vector autoregressions with non-stationary (unconditional) volatility of a very general form, which includes single and multiple volatility breaks as special cases. We show that the conventional rank statistics computed as in Johansen (1988,1991) are potentially unreliable. In particular, their large sample distributions depend on the integrated covariation of the underlying multivariate volatility process which impacts on both the size and power of the associated co-integration tests, as we demonstrate numerically. A solution to the identified inference problem is provided by considering wild bootstrap-based implementations of the rank tests. These do not require the practitioner to specify a parametric model for volatility, nor to assume that the pattern of volatility is common to, or independent across, the vector of series under analysis. The bootstrap is shown to perform very well in practice.

/pdf/testing-for-co-integration-in-vector-autoregressions-with-58v7dtylio.pdf

Anders Rahbek

Papers

Asymptotic Inference on Cointegrating Rank in Partial Systems

Asymptotic Inference for Nonstationary GARCH

Trend stationarity in the I(2) cointegration model

Asymptotic normality of the qmle estimator of arch in the nonstationary case

Testing for Co-Integration in Vector Autoregressions with Non-Stationary Volatility