The Power Function of the Likelihood Ratio Test for Cointegration
Lecture notes in economics and mathematical systemsPublished 1 January 1991
Søren Johansen
Citations38
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Abstract
The distribution of the likelihood ratio test for cointegration under local alternatives is found to be given by a suitable functional of a p—r dimensional Ornstein—Uhlenbeck process. The results are related to those of Phillips (1988), who considered near—integrated processes and derived the power function of a test for unit roots based on a regression estimate. The power function is investigated numerically for a one—dimensional alternative.
Keywords
Economics, Econometrics and Finance
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