Testing for multicointegration

We suggest how to redefine the multicointegration model of Granger and Lee (1990) in terms of an I(2) system and subsequently propose a one-step procedure for estimation and inference which will have favourable statistical properties compared to the two-step procedure suggested by Granger and Lee. With respect to the single equation residual based cointegration procedure for I(2) systems we tabulate new critical values that are necessary to accommodate the presence of deterministic components.