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Trend stationarity in the \(I(2)\) cointegration model. (English) Zbl 1041.62522
Summary: A vector autoregressive model for \(I(2)\) processes which allows for trend-stationary components and restricts the deterministic part of the process to be at most linear is defined. A two-step statistical analysis of the model is derived. The joint test of \(I(1)\) and \(I(2)\) cointegrating ranks is shown to be asymptotically similar with respect to the drift terms and the asymptotic distribution is tabulated. The cointegrating parameters are shown to be mixed Gaussian and an application for UK monetary data illustrates the proposed analysis.

MSC:
62P05 Applications of statistics to actuarial sciences and financial mathematics
62M10 Time series, auto-correlation, regression, etc. in statistics (GARCH)
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