Next Article in Journal
Structural Break Tests Robust to Regression Misspecification
Next Article in Special Issue
The Relation between Monetary Policy and the Stock Market in Europe
Previous Article in Journal
Recent Developments in Macro-Econometric Modeling: Theory and Applications
Previous Article in Special Issue
Evaluating Forecasts, Narratives and Policy Using a Test of Invariance
Article Menu

Export Article

Open AccessArticle
Econometrics 2018, 6(2), 26;

Johansen’s Reduced Rank Estimator Is GMM

Department of Economics, University of Wisconsin, Madison, WI 53706, USA
Received: 30 January 2018 / Revised: 9 March 2018 / Accepted: 16 May 2018 / Published: 18 May 2018
(This article belongs to the Special Issue Celebrated Econometricians: Katarina Juselius and Søren Johansen)
Full-Text   |   PDF [225 KB, uploaded 18 May 2018]


The 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
Keywords: GMM; VECM; reduced rank GMM; VECM; reduced rank
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).

Share & Cite This Article

MDPI and ACS Style

Hansen, B.E. Johansen’s Reduced Rank Estimator Is GMM. Econometrics 2018, 6, 26.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics



[Return to top]
Econometrics EISSN 2225-1146 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top