Maximum likelihood estimation of the I(2) model under linear restrictions

Journal article

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.

Authors: Doornik, J

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: MDPI
• Journal: Econometrics
• Volume: 5
• Issue: 2
• Article number: 19
• Publication date: 2017-05-15
• Acceptance date: 2017-05-08
• DOI: 10.3390/econometrics5020019
• EISSN: 2225-1146
• Keywords: reduced rank regression; generalized least squares; cointegration; representation; vector autoregression; maximum likelihood estimation; I(2)