A general inversion theorem for cointegration. (26th November 2019)

• Record Type: Journal Article
• Authors: Franchi, Massimo; Paruolo, Paolo
• Is Part Of: Econometric reviews. Volume 38:Number 10(2019)
• Page Start: 1176
• Page End: 1201
• Publication Date: 2019-11-26
• Subjects: Cointegration -- common trends -- triangular representation -- moving average representation -- auto regressive representation; C32; Econometrics -- Periodicals; 330.015195
• DOI: 10.1080/07474938.2018.1536100
• Languages: English
• ISSNs: 0747-4938

Abstract

Abstract: A generalization of the Granger and the Johansen Representation Theorems valid for any (possibly fractional) order of integration is presented. This Representation Theorem is based on inversion results that characterize the order of the pole and the coefficients of the Laurent series representation of the inverse of a matrix function around a singular point. Explicit expressions of the matrix coefficients of the (polynomial) cointegrating relations, of the Common Trends and of the Triangular representations are provided, either starting from the Moving Average or the Auto Regressive form. This contribution unifies different approaches in the literature and extends them to an arbitrary order of integration. The role of deterministic terms is discussed in detail.