The Korean Journal of Applied Statistics (응용통계연구)

The Korean Statistical Society (한국통계학회)
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Effects of the Misspecification of Cointegrating Ranks in Seasonal Models

  • Seong, Byeong-Chan (Dept. of Statistics, Chung-Ang University) ;
  • Cho, Sin-Sup (Dept. of Statistics, Seoul National University) ;
  • Ahn, Sung-K. (Dept. of Management and Operations, Washington State University) ;
  • Hwang, S.Y. (Dept. of Statistics, Sookmyung Women's University)
  • Published : 2008.10.31
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Abstract

We investigate the effects of the misspecification of cointegrating(CI) ranks at other frequencies on the inference of seasonal models at the frequency of interest; our study includes tests for CI ranks and estimation of CI vectors. Earlier studies focused mostly on a single frequency corresponding to one seasonal root at a time, ignoring possible cointegration at the remaining frequencies. We investigate the effects of the mis-specification, especially in finite samples, by adopting Gaussian reduced rank(GRR) estimation by Ahn and Reinsel (1994) that considers cointegration at all frequencies of seasonal unit roots simultaneously. It is observed that the identification of the seasonal CI rank at the frequency of interest is sensitive to the mis-prespecification of the CI ranks at other frequencies, mainly when the CI ranks at the remaining frequencies are underspecified.

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References

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