Testing for codependence of non-stationary variables

Abstract

"We analyze non-stationary time series that do not only trend together in the long run, but restore the equilibrium immediately in the period following a deviation. While this represents a common serial correlation feature, the framework is extended to codependence, allowing for delayed adjustment. We show which restrictions are implied for VECMs and lay out a likelihood ratio test. In addition, due to identification problems in codependent VECMs a GMM test approach is proposed. We apply the concept to US and European interest rate data, examining the capability of the Fed and ECB to control overnight money market rates." (Author's abstract, IAB-Doku) ((en))

Cite article

Trenkler, C. & Weber, E. (2010): Testing for codependence of non-stationary variables. (Regensburger Diskussionsbeiträge zur Wirtschaftswissenschaft 446), Regensburg, 22 p.