Generating Univariate Fractional Integration within a Large VAR(1)

Guillaume Chevillon (1) , Alain Hecq (2) , Sébastien Laurent (3, 4)

1 ESSEC Business School
2 Department of Quantitative Economics, School of Business and Economics, Maastricht University
3 AMSE - Aix-Marseille Sciences Economiques
4 Aix-Marseille Graduate School of Management

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: long memory; vector autoregressive model; marginalization; final equation representation

Domaines: Economies et finances

Guillaume Chevillon, Alain Hecq, Sébastien Laurent. Generating Univariate Fractional Integration within a Large VAR(1). 2018. ⟨halshs-01944588⟩