Journal
QUANTITATIVE ECONOMICS
Volume 12, Issue 3, Pages 683-742Publisher
WILEY
DOI: 10.3982/QE1406
Keywords
Durbin-Wu-Hausman tests; partial adaptivity; semiparametric estimators; singular covariance matrices; uncertainty and the business cycle; C12; C14; C22; C32; C52
Categories
Funding
- Spanish Ministry of Economy, Industry and Competitiveness [ECO 2017-89689]
- Santander CEMFI Research Chair
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The study introduces a new testing method to compare three or more estimators in multivariate regression models, and provides a new structural Var model in multivariate regression models to capture the relationship between economic and financial uncertainty and the business cycle.
We propose generalized DWH specification tests which simultaneously compare three or more likelihood-based estimators in multivariate conditionally heteroskedastic dynamic regression models. Our tests are useful for Garch models and in many empirically relevant macro and finance applications involving Vars and multivariate regressions. We determine the rank of the differences between the estimators' asymptotic covariance matrices under correct specification, and take into account that some parameters remain consistently estimated under distributional misspecification. We provide finite sample results through Monte Carlo simulations. Finally, we analyze a structural Var proposed to capture the relationship between macroeconomic and financial uncertainty and the business cycle.
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