Maximum Likelihood Estimation of the I(2) Model under Linear Restrictions

May 2017

Econometrics, Volume 5, Issue 2


Jurgen A. Doornik

 Estimation of the I(2) cointegrated vector autoregressive (CVAR) model is considered. Without further restrictions, estimation of the I(1) model is by reduced-rank regression (Anderson (1951)). Maximum likelihood estimation of I(2) models, on the other hand, always requires iteration. This paper presents a new triangular representation of the I(2) model. This is the basis for a new estimation procedure of the unrestricted I(2) model, as well as the I(2) model with linear restrictions imposed

Department Author

Jurgen Doornik

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