Abstract
For the modelling of time series, multivariate linear and nonlinear systems of equations became a standard tool. These models are also applied for non-stationary processes. However, estimation results in finite samples might depend on the specification of the model dynamics.We propose a method for automatic identification of the dynamic part of VEC–models. Model selection is based on a modified information criterion. The resulting complex discrete optimization problem is tackled using a hybrid heuristic. We present the algorithm and results of a simulation study indicating the performance both with regard to the dynamic structure and the rank selection in the VEC–model.
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