Johansen’s Reduced Rank Estimator Is GMM
AbstractThe generalized method of moments (GMM) estimator of the reduced-rank regression model is derived under the assumption of conditional homoscedasticity. It is shown that this GMM estimator is algebraically identical to the maximum likelihood estimator under normality developed by Johansen (1988). This includes the vector error correction model (VECM) of Engle and Granger. It is also shown that GMM tests for reduced rank (cointegration) are algebraically similar to the Gaussian likelihood ratio tests. This shows that normality is not necessary to motivate these estimators and tests. View Full-Text
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Hansen, B.E. Johansen’s Reduced Rank Estimator Is GMM. Econometrics 2018, 6, 26.
Hansen BE. Johansen’s Reduced Rank Estimator Is GMM. Econometrics. 2018; 6(2):26.Chicago/Turabian Style
Hansen, Bruce E. 2018. "Johansen’s Reduced Rank Estimator Is GMM." Econometrics 6, no. 2: 26.
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