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Econometrics 2017, 5(2), 19; doi:10.3390/econometrics5020019

Maximum Likelihood Estimation of the I(2) Model under Linear Restrictions

Department of Economics and Institute for New Economic Thinking at the Oxford Martin School, University of Oxford, Oxford, OX1 3UQ, UK
Academic Editor: Katarina Juselius
Received: 27 February 2017 / Revised: 2 May 2017 / Accepted: 8 May 2017 / Published: 15 May 2017
(This article belongs to the Special Issue Recent Developments in Cointegration)
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Abstract

Estimation of the I(2) cointegrated vector autoregressive (CVAR) model is considered. Without further restrictions, estimation of the I(1) model is by reduced-rank regression (Anderson (1951)). Maximum likelihood estimation of I(2) models, on the other hand, always requires iteration. This paper presents a new triangular representation of the I(2) model. This is the basis for a new estimation procedure of the unrestricted I(2) model, as well as the I(2) model with linear restrictions imposed. View Full-Text
Keywords: cointegration; I(2); vector autoregression; representation; maximum likelihood estimation; reduced rank regression; generalized least squares cointegration; I(2); vector autoregression; representation; maximum likelihood estimation; reduced rank regression; generalized least squares
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Doornik, J.A. Maximum Likelihood Estimation of the I(2) Model under Linear Restrictions. Econometrics 2017, 5, 19.

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