Economics Commons^™

On Multicointegration, Peter C. B. Phillips, Igor Kheifets

Cowles Foundation Discussion Papers

A semiparametric triangular systems approach shows how multicointegration can occur naturally in an I(1) cointegrated regression model. The framework reveals the source of multicointegration as singularity of the long run error covariance matrix in an I(1) system, a feature noted but little explored in earlier work. Under such singularity, cointegrated I(1) systems embody a multicointegrated structure and may be analyzed and estimated without appealing to the associated I(2) system but with consequential asymptotic properties that can introduce asymptotic bias into conventional methods of cointegrating regression. The present paper shows how estimation of such systems may be accomplished under multicointegration without …