Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration

This paper employs response surface regressions based on simulation experments to calculate asymptotic distribution functions for the likelihood ratio tests for cointegration proposed by Johansen The paper provides tables of critical values that are very much more accurate than those available previously However the principal contributions of the paper are a set of data les that contain estimated asymptotic quantiles obtained from response surface estimation and a computer program for utilizing them This program which is freely available via the Internet can easily be used to calculate asymptotic critical values and P values Graphs of some of the tabulated distribution functions are also provided An empirical example motivated by the European Economic and Monetary Union proposed in the Maastricht Treaty suggests that not all the countries of the European Union may qualify initially for participation in the EMU.cointegration tests, Johansen tests, vector autoregressions, response surfaces, critical values, approximate P values, simulation, EMU, European Union

European Monetary Union: A Cointegration Analysis

This paper employs systems-based cointegration techniques developed by Johansen (1988, 1995) to determine which European Union countries would form a successful Economic and Monetary Union (EMU), based on long-run behavior of the nominal convergence criteria laid down in the Maastricht treaty. The original 12 European Union countries are analyzed together. Nominal exchange rates, real exchange rates, longterm interest rates, and government budget deficits are each analyzed for co-movements among the 12 countries and various subgroups of them. The results suggest that not all of the 12 original countries of the European Union could possibly form a successful EMU over time, unless several countries made significant adjustments

Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration

This paper employs response surface regressions based on simulation experiments to calculate asymptotic distribution functions for the Johansen-type likelihood ratio tests for cointegration. These are carried out in the context of the models recently proposed by Pesaran, Shin, and Smith (1997) that allow for the possibility of exogenous variables integrated of order one. The paper calculates critical values that are very much more accurate than those available previously. The principal contributions of the paper are a set of data files that contain estimated asymptotic quantiles obtained from response surface estimation and a computer program for utilizing them. This program, which is freely available via the Internet, can be used to calculate both asymptotic critical values and P values. JEL Classification Number: C22 Keywords: cointegration tests, Johansen tests, vector autoregressions, exogenous variables, response surfaces, critical values, approximat

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