Some tests for parameter constancy in cointegrated VAR-models

TY - JOUR

T1 - Some tests for parameter constancy in cointegrated VAR-models

AU - Hansen, Henrik

AU - Johansen, Søren

PY - 1999

Y1 - 1999

N2 - Some methods for the evaluation of parameter constancy in vector autoregressive (VAR) models are discussed. Two different ways of re-estimating the VAR model are proposed; one in which all parameters are estimated recursively based upon the likelihood function for the first observations, and another in which the cointegrating relations are estimated recursively from a likelihood function, where the short-run parameters have been concentrated out. We suggest graphical procedures based on recursively estimated eigenvalues to evaluate the constancy of the long-run parameters in the model. Specifically we look at the time path of the eigenvalues using a new result on the asymptotic distribution of the estimated eigenvalues. Furthermore we show that the fluctuation test by Ploberger et al. (1989) and the Lagrange multiplier (LM) type test for constancy of parameters by Nyblom (1989) can be applied to test the constancy of the long-run parameters in the cointegrated VAR-model. All results are illustrated using a model for the term structure of interest rates on US Treasury securities. 

AB - Some methods for the evaluation of parameter constancy in vector autoregressive (VAR) models are discussed. Two different ways of re-estimating the VAR model are proposed; one in which all parameters are estimated recursively based upon the likelihood function for the first observations, and another in which the cointegrating relations are estimated recursively from a likelihood function, where the short-run parameters have been concentrated out. We suggest graphical procedures based on recursively estimated eigenvalues to evaluate the constancy of the long-run parameters in the model. Specifically we look at the time path of the eigenvalues using a new result on the asymptotic distribution of the estimated eigenvalues. Furthermore we show that the fluctuation test by Ploberger et al. (1989) and the Lagrange multiplier (LM) type test for constancy of parameters by Nyblom (1989) can be applied to test the constancy of the long-run parameters in the cointegrated VAR-model. All results are illustrated using a model for the term structure of interest rates on US Treasury securities. 

KW - Faculty of Social Sciences

KW - cointegration

KW - eigenvalues

KW - fluctuation test

U2 - 10.1111/1368-423X.00035

DO - 10.1111/1368-423X.00035

M3 - Journal article

SN - 1368-4221

VL - 2

SP - 306

EP - 333

JO - Econometrics Journal

JF - Econometrics Journal

IS - 2

ER -