Unit roots, cointegration, and pretesting in var models

Nikolay Gospodinov, Ana María Herrera, Elena Pesavento

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

37 Scopus citations


This article investigates the robustness of impulse response estimators to near unit roots and near cointegration in vector autoregressive (VAR) models. We compare estimators based on VAR specifications determined by pretests for unit roots and cointegration as well as unrestricted VAR specifications in levels. Our main finding is that the impulse response estimators obtained from the levels specification tend to be most robust when the magnitude of the roots is not known. The pretest specification works well only when the restrictions imposed by the model are satisfied. Its performance deteriorates even for small deviations from the exact unit root for one or more model variables. We illustrate the practical relevance of our results through simulation examples and an empirical application.

Original languageEnglish
Title of host publicationAdvances in Econometrics
Number of pages35
StatePublished - 2013

Publication series

NameAdvances in Econometrics
ISSN (Print)0731-9053


  • Cointegration
  • Impulse response functions
  • Pretesting
  • Short/longrun identification
  • Structural var
  • Unit roots

ASJC Scopus subject areas

  • Economics and Econometrics


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