Template-type: ReDIF-Paper 1.0
Author-Name: Manabu Asai
Author-Workplace-Name: Faculty of Economics, Soka University, Japan.
Author-Name: Shelton Peiris
Author-Workplace-Name: School of Mathematics and Statistics, University of Sydney, Australia
.

Author-Name:
 Michael McAleer
Author-Workplace-Name:
 Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute Erasmus School of 
	Economics Erasmus University Rotterdam, The Netherlands and Department of Quantitative Economics Complutense University of 
	Madrid, Spain And Institute of Advanced Sciences Yokohama National University, Japan.
Author-Name: David E. Allen
Author-Workplace-Name: School of Mathematics and Statistics, University of Sydney, Australia, Department of Finance, Asia University, Taiwan, and School of 
	Business and Law, Edith Cowan University, Western Australia, Department of Finance, Asia University, Taiwan.
Title: Cointegrated Dynamics for A Generalized Long Memory Process: An Application to Interest Rates
Abstract: Recent developments in econometric methods enable estimation and testing of general long memory process, which include the general Gegenbauer process. 
	This paper considers the error correction model for a vector general long memory process, which encompasses the vector autoregressive 
	fractionally-integrated moving average and general Gegenbauer process. We modify the tests for unit roots and cointegration, based on the concept of 
	heterogeneous autoregression. The Monte Carlo simulations show that the finite sample properties of the modified tests are satisfactory, while the 
	conventional tests suffer from size distortion. Empirical results for interest rates series for the U.S.A. and Australia indicate that: (1) the 
	modified unit root test detected unit roots for all series, (2) after differencing, all series favour the general Gegenbauer process, (3) the modified 
	test for cointegration found only two cointegrating vectors, and (4) the zero interest rate policy in the U.S.A. has no effect on the cointegrating 
	vector for the two countries.
Classification-JEL: C22, C32, C51.
Keywords: Long Memory Processes; Gegenbauer Process; Dickey-Fuller Tests; Cointegration; Differencing; Interest Rates.
Length: 32 pages 
Creation-Date: 2018-09
Number: 2018-22
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1822.txt
File-URL: https://eprints.ucm.es/id/eprint/49150/1/1822.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1822