Cointegration in functional autoregressive processes

This article defines the class of H-valued autoregressive (AR) processes with a unit root of finite type, where H is a possibly infinite-dimensional separable Hilbert space, and derives a generalization of the Granger–Johansen Representation Theorem valid for any integration order d = 1,2,.... An existence theorem shows that the solution of an AR process with a unit root of finite type is necessarily integrated of some finite integer order d, displays a common trends representation with a finite number of common stochastic trends, and it possesses an infinite-dimensional cointegrating space when dimH = ∞. A characterization theorem clarifies the connections between the structure of the AR operators and (i) the order of integration, (ii) the structure of the attractor space and the cointegrating space, (iii) the expression of the cointegrating relations, and (iv) the triangular representation of the process. Except for the fact that the dimension of the cointegrating space is infinite when dimH = ∞, the representation of AR processes with a unit root of finite type coincides with the one of finite-dimensional VARs, which can be obtained setting H = Rp in the present results.

FRANCHI Massimo;  PARUOLO Paolo; 

2021-01-13

CAMBRIDGE UNIV PRESS

JRC110302

0266-4666 (online),   

https://www.cambridge.org/core/journals/econometric-theory/article/cointegration-in-functional-autoregressive-processes/AB891D2DE9FB57B94FC3785750A856AB#,    https://publications.jrc.ec.europa.eu/repository/handle/JRC110302,   

10.1017/S0266466619000306 (online),