Generating univariate fractional integration within a large VAR(1)

Guillaume Chevillon (1) , Alain Hecq (2) , Sébastien Laurent (3)

1 ESSEC Business School
2 Department of Quantitative Economics [Maastricht]
3 AMSE - Aix-Marseille Sciences Economiques

This paper shows that a large dimensional vector autoregressive model (VAR) of finite order can generate fractional integration in the marginalized univariate series. We derive high-level assumptions under which the final equation representation of a VAR(1) leads to univariate fractional white noises and verify the validity of these assumptions for two specific models.

Mots clés: Vector autoregressive model; Final equation representation; Long memory; Marginalization

Domaines: Economies et finances; Économie et finance quantitative [q-fin]

Guillaume Chevillon, Alain Hecq, Sébastien Laurent. Generating univariate fractional integration within a large VAR(1). Journal of Econometrics, 2018, 204 (1), pp.54-65. ⟨10.1016/j.jeconom.2018.01.002⟩. ⟨hal-01980783⟩