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MALCOLM
(MAximum Likelihood COintegration analysis of Linear Models)
The theory and practice of cointegration analysis in RATS
by Rocco Mosconi
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MALCOLM Manual

Overview

The manual is divided into 5 Chapters:
 
CHAPTER 1 Gives a concise review of the literature about Maximum Likelihood analysis of the I(1) model, Maximum Likelihood analysis of the I(2) model, structural VAR analysis, univariate unit roots analysis, giving the formulae implemented in MALCOLM and precise references to the literature.
CHAPTER 2 Describes the structure of MALCOLM and introduces to its use through the analysis of simulated data.
CHAPTER 3 Illustrates the analysis of some real economic data, showing how MALCOLM may be used to implement a model building strategy aimed at a data coherent and theory consistent model.
CHAPTER 4 Gives instructions for installing and running MALCOLM.
CHAPTER 5 Gives RATS experts helpful information for using the building blocks of MALCOLM, i.e. the subroutines, in order to customise MALCOLM or build their own cointegration programs.


Table of Contents
 

0. Preface, p. 1

1. Theoretical Background and Notation, p. 5

1.1 The VAR Model, p. 5
1.2 VAR specification analysis, p. 6
1.3 The I(1) model, p. 9
1.4 Inference in the I(1) model, p. 15

    1.4.1 Estimating the model, p. 16
    1.4.2 Testing for the cointegration rank, p. 16
    1.4.3 Testing for linear restrictions on a and b*, p. 17
    1.4.4 Identification of b*, p. 19
1.5 The I(2) model, p. 22
1.6 Inference in the I(2) model, p. 30
    1.6.1 Estimating the model, p. 30
    1.6.2 Testing for the cointegration ranks r and s, p. 32
    1.6.3 Hypothesis testing on cointegrating parameters, p. 32
1.7 Moving Average Representations, p. 33
1.8 Structural VAR analysis (by Gianni Amisano and Mario Seghelini), p. 36
1.9 Univariate unit roots analysis, p. 46
    1.9.1 Augmented Dickey-Fuller (ADF) type test, p. 47
    1.9.2 Phillips-Perron (PHP) type test, p. 48
    1.9.3 Schmidt-Phillips (SCP) type test, p. 48
2. The Menus, p. 51

2.1 Overview on MALCOLM, p. 51
2.2 The sample series in SIMUL.RAT, p. 54
2.3 The models based on the data in SIMUL.RAT, p. 57
2.4 The Main Menu, p. 59
2.5 Menu 1: Univariate Analysis, p. 61

2.5.1 Graphics, p. 62
2.5.2 Autocorrelation functions, p. 63
2.5.3 Unit root tests, p. 65
2.6 Menu 2: Choose/Change the Model, p. 69
2.7 Menu 3: Specification Analysis, p. 73
2.7.1 Tests for the maximum lag, p. 75
2.7.2 Tests for the trend polynomial, p. 77
2.7.3 Tests for the cointegration rank (r), p. 78
2.7.4 Tests for the cointegration ranks (r,s), p. 82
2.7.5 Parameters stability, p. 84
2.7.6 Roots of the model, p. 87
2.7.7 Residuals analysis, p. 88
2.8 Menu 4: Analysing the I(1) Model, p. 90
2.8.1 Routine tests on each variable, p. 92
2.8.2 Identification of b*, p. 97
2.8.3 Non causality test, p. 100
2.8.4 General linear restrictions on a and b*, p. 103
2.9 Menu 5: Structural VAR Analysis (by Gianni Amisano and Mario Seghelini), p. 105
2.9.1 Estimation, p. 106
2.9.2 Simulation, p. 116
2.9.3 Graphics, p. 118
2.10 Menu 6: Forecasting, p. 122
2.10.1 Compute forecasts, p. 123
2.10.2 Graph historical and forecasted values, p. 125
2.11 Menu 7: View the Model, p. 127
2.11.1 View the I(1) parameterisation, p. 128
2.11.2 View the I(2) parameterisation, p. 132
3. Using MALCOLM, p. 136

3.1 Introduction, p. 136
3.2 Guided tour #1: I(1) cointegration analysis of a set of Italian interest rates, p. 138
3.3 Guided tour #2: Checking for I(2)-ness in a set of Italian macroeconomic variables, p. 148
3.4 Guided tour #3: Structural VAR analysis for a set of Italian interest rates (by Gianni Amisano and Mario Seghelini), p. 151

4. Installation and Use Guide, p.  157

4.1 RATS version and hardware requirements, p. 157
4.2 Installing MALCOLM, p. 157
4.3 Running MALCOLM, p. 159
4.4 Output, p. 162
4.5 Changes and improvements with respect to former releases, p. 163
4.6 Coming soon, p. 164
4.7 Suggestions, p. 165

5. The Procedures, p. 166

5.1 Files and procedures, p. 167
5.2 Syntax of MALCOLM procedures, p. 170

    5.2.1 Matrix algebra routines, p. 171
      5.2.1.1 PACKUP, p. 171
      5.2.1.2 UNPACK, p. 173
      5.2.1.3 RANK, p. 174
      5.2.1.4 ORTHOGON, p. 175
      5.2.1.5 UNION, p. 176
      5.2.1.6 INTERSEC, p. 178
    5.2.2 Cointegration analysis routines, p. 179
      5.2.2.1 MATMAKER, p. 180
      5.2.2.2 EIGSOLVE, p. 184
      5.2.2.3 EIGITER, p. 188
      5.2.2.4 EIG_I2, p. 193
      5.2.2.5 SIGECM, p. 198
      5.2.2.6 CONSTRIC, p. 200
      5.2.2.7 THEOIDEN, p. 201
      5.2.2.8 BERAJAR, p. 203

    5.2.3 Structural VAR analysis routines (by Gianni Amisano and Mario Seghelini), p. 205
      5.2.3.1 SVAR, p. 206
      5.2.3.2 VMA, p. 209
      5.2.3.3 ECM2VAR, p. 211
      5.2.3.4 CONSTRAB, p. 214
      5.2.3.5 IMPLEXPL, p. 216
      5.2.3.6 RLOAD, p. 217
      5.2.3.7 ALLCNSTR, p. 219
    5.2.4 Univariate unit root analysis routines, p. 221
      5.2.4.1 UNITROOT, p. 221

    5.3 List of MALCOLM objects, p. 223
6. References , p. 22

 


Copyright © 1996-99 Rocco Mosconi. All Rights Reserved.

 

 

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