Publication Type
Journal Article
Version
acceptedVersion
Publication Date
1-2024
Abstract
A semiparametric triangular systems approach shows how multicointegrating linkages occur naturally in an I(1) cointegrated regression model when the long run error variance matrix in the system is singular. Under such singularity, cointegrated I(1) systems embody a multicointegrated structure that makes them useful in many empirical settings. Earlier work shows that such systems may be analyzed and estimated without appealing to the associated I(2) system but with suboptimal convergence rates and potential asymptotic bias. The present paper develops a robust approach to estimation and inference of such systems using high dimensional IV methods that have appealing asymptotic properties like those known to apply in the optimal estimation of cointegrated systems (Phillips, 1991). The approach uses an extended version of high-dimensional trend IV (Phillips, 2006, 2014) estimation with deterministic orthonormal instruments. The methods and derivations involve new results on high-dimensional IV techniques and matrix normalization in the limit theory that are of independent interest. Wald tests of general linear restrictions are constructed using a fixed-b long run variance estimator that leads to robust pivotal HAR inference in both cointegrated and multicointegrated cases. Simulations show good properties of the estimation and inferential procedures in finite samples. An empirical illustration to housing stocks, starts and completions is provided.
Keywords
Cointegration, HAR inference, High-dimensional IV, Long run variance matrix, Multicointegration, Singularity, Trend IV estimation
Discipline
Econometrics | Economic Theory
Research Areas
Econometrics
Publication
Journal of Econometrics
Volume
238
Issue
2
First Page
1
Last Page
20
ISSN
0304-4076
Identifier
10.1016/j.jeconom.2023.105622
Publisher
Elsevier: 24 months
Citation
PHILLIPS, Peter C. B. and KHEIFETS, Igor L..
High-dimensional IV cointegration estimation and inference. (2024). Journal of Econometrics. 238, (2), 1-20.
Available at: https://ink.library.smu.edu.sg/soe_research/2710
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jeconom.2023.105622
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