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No. 483: A Note on Joint Estimation of Common Cycles and Common Trends in Nonstationary Multivariate Systems

George Kapetanios , Queen Mary, University of London

January 1, 2003

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Abstract

We provide a new method for jointly consistently estimating common trends and cycles in unit root nonstationary multivariate systems. We concentrate on the MA representation of the differenced data and we jointly impose the reduced rank restriction for the common cycles and the common trends on the MA representation coefficients.

J.E.L classification codes: C32, C14

Keywords:Common cycles and trends, Tests of rank, Cointegration

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