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Selection of Optimal Lag Length in Cointegrated VAR Models with Weak Form of Common Cyclical Features
Brazilian Review of Econometrics
View Archive Info| Field | Value | |
| Title |
Selection of Optimal Lag Length in Cointegrated VAR Models with Weak Form of Common Cyclical Features
Selection of Optimal Lag Length in Cointegrated VAR Models with Weak Form of Common Cyclical Features |
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| Creator |
Gutierrez, Carlos Enrique Carrasco; FUCAPE Business School
Souza, Reinaldo Castro; DEE-PUC-RJ Guillén, Osmani Teixeira de Carvalho; Central Bank of Brazil and Ibmec-RJ |
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| Subject |
Cointegration; Common Cyclical Features; Reduced Rank Model; Information Criteria
C32; C53 Cointegration; Common Cyclical Features; Reduced Rank Model; Information Criteria C32; C53 |
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| Description |
An important aspect of empirical research based on the vector autoregres- sive (VAR) model is the choice of the lag order, since all inferences in this model depend on the correct model speciÖcation. There have been many studies of how to select the lag order of a nonstationary VAR model subject to cointegration restrictions. In this work, we consider in the model an addi- tional weak form (WF) restriction of common cyclical features to analyze the appropriate way to select the correct lag order. We use two methodologies: the traditional information criteria (AIC, HQ and SC) and an alternative cri- terion (IC(p;s)) that selects the lag order p and the rank structure s due to the WF restriction. We use a Monte-Carlo simulation in the analysis. The results indicate that the cost of ignoring additional WF restrictions in vector autoregressive modeling can be high, especially when the SC criterion is used
An important aspect of empirical research based on the vector autoregres- sive (VAR) model is the choice of the lag order, since all inferences in this model depend on the correct model speciÖcation. There have been many studies of how to select the lag order of a nonstationary VAR model subject to cointegration restrictions. In this work, we consider in the model an addi- tional weak form (WF) restriction of common cyclical features to analyze the appropriate way to select the correct lag order. We use two methodologies: the traditional information criteria (AIC, HQ and SC) and an alternative cri- terion (IC(p;s)) that selects the lag order p and the rank structure s due to the WF restriction. We use a Monte-Carlo simulation in the analysis. The results indicate that the cost of ignoring additional WF restrictions in vector autoregressive modeling can be high, especially when the SC criterion is used |
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| Publisher |
Sociedade Brasileira de Econometria
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| Date |
2009-05-01
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion — — |
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| Format |
application/pdf
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| Identifier |
http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/2696
10.12660/bre.v29n12009.2696 |
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| Source |
Brazilian Review of Econometrics; Vol 29, No 1 (2009); 59-78
Brazilian Review of Econometrics; Vol 29, No 1 (2009); 59-78 1980-2447 |
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| Language |
eng
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| Relation |
http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/2696/1824
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