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THE ASYMPTOTIC EFFICIENCY OF COINTEGRATION ESTIMATORS UNDER TEMPORAL AGGREGATION

Published online by Cambridge University Press:  08 January 2003

Marcus J. Chambers
Marcus J. Chambers
Affiliation:
University of Essex
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Abstract

This paper examines the effects of temporal aggregation on the asymptotic variances of estimators in cointegrated systems. Two important findings are obtained. First, estimators based on flow data alone are more efficient than when the data are all stocks or a mixture of stocks and flows. Second, estimators based on flow data are as efficient as when the data are recorded continuously. A method of improving efficiency with stock variables is also proposed, and an empirical illustration of the method is provided in the context of long-run money demand regressions.I thank Roy Bailey, Rex Bergstrom, Roderick McCrorie, a co-editor, and two anonymous referees for helpful comments. I also thank Katsumi Shimotsu for help with some data issues. None of these individuals are implicated, however, in any possible shortcomings of this paper. The financial support provided by the ESRC under grant R000221818 is gratefully acknowledged.

Type
Research Article
Information
Econometric Theory , Volume 19 , Issue 1 , February 2003 , pp. 49 - 77
Copyright
© 2003 Cambridge University Press

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