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ANALYSIS OF COEXPLOSIVEPROCESSES

Published online by Cambridge University Press:  07 October 2009

Bent Nielsen
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Abstract

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A vector autoregressive model allowing for unit rootsas well as an explosive characteristic root isdeveloped. The Granger-Johansen representation showsthat this results in processes with two commonfeatures: a random walk and an explosively growingprocess. Cointegrating and coexplosive vectors canbe found that eliminate these common factors. Thelikelihood ratio test for a simple hypothesis on thecoexplosive vectors is analyzed. The method isillustrated using data from the extreme Yugoslavianhyperinflation of the 1990s.

Information

Type
Research Article
Information
Econometric Theory , Volume 26 , Issue 3 , June 2010 , pp. 882 - 915
Copyright
Copyright © Cambridge University Press 2009

Footnotes

I am grateful to Søren Johansen, who read anearlier version of this paper very carefully andpresented it at the Conference on Common Featuresin Rio de Janeiro in July 2002. I have alsobenefited from discussions with Martin Wagner andinsightful comments from the referees.Computations were done using PcGive (Doornik andHendry, 2001). Financial support from ESRC grantRES-000-27-0179 is gratefully acknowledged.

References

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