Journal
ECONOMETRICS JOURNAL
Volume 11, Issue 1, Pages 39-57Publisher
BLACKWELL PUBLISHING
DOI: 10.1111/j.1368-423X.2007.00226.x
Keywords
influential observation; likelihood displacement; money demand; cointegration; vector autoregressive model
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This paper suggests a set of simple diagnostic tools for assessing the influence of a patch of kappa observations in a cointegrated vector autoregressive model. The diagnostics are based on the leave-kappa-out principle (Bruce and Martin, 1989 Journal of the Royal Statistical Society, Series B, 51, 363-424) and the influence is measured by the likelihood displacement (Cook and Weisberg, 1982 Residuals and Influence in Regression. London: Chapman and Hall). An application to Danish money demand 1973-2003 suggests that the observations for real money in 1999 are affected by institutional factors related to the definition of broad money, and that the dynamic adjustment following the international oil-price shock in 1973 is very influential for the long-run parameters.
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