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An Econometric Analysis of I(2) Variables
Author(s) -
Haldrup Niels
Publication year - 1998
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/1467-6419.00069
Subject(s) - cointegration , econometrics , economics , econometric model , unit root , intuition , series (stratigraphy) , statistical hypothesis testing , mathematical economics , mathematics , statistics , paleontology , philosophy , epistemology , biology
This paper provides a selective survey of the recent literature dealing with I(2) variables in economic time series, that is, processes that require to be differenced twice in order to become stationary. With reference to particular economic models intuition is provided of why I(2)‐and polynomial cointegration are features likely to occur in economics. The properties of I(2) series are discussed and I review topics such as: Testing for double unit roots, representations of I(2) cointegrated systems, and hypothesis testing in single equations as well as in systems of equations. Different data sets are used to illustrate the various econometric and statistical techniques.