Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 297: Starting values in estimation of cointegrating vectors with restrictions

Johan Lyhagen () and Lars Forsberg ()
Additional contact information
Johan Lyhagen: Dept. of Economic Statistics, Stockholm School of Economics, Postal: P.O. Box 6501, S-113 83 Stockholm, Sweden
Lars Forsberg: Department of Information Science, Division of Statistics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: In cointegration analysis, when considering a hypothesis of the kind beta =(H_1*phi_1,...,H_n*phi_n) the estimator is a simple switching method that requires starting values. We propose using additional restrictions, then solutions of an eigenvector problem may be used as starting values. Using a real world data set the proposed starting values seem to be better than the old, and sometimes they are much better.

Keywords: Cointegration; Hypothesis testing; Starting values

JEL-codes: C12; C32

7 pages, February 4, 1999

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