Abstract :
A vector autoregressive model allowing for unit roots as well as an explosive characteristic
root is developed. The Granger-Johansen representation shows that this
results in processes with two common features: a random walk and an explosively
growing process. Cointegrating and coexplosive vectors can be found that eliminate
these common factors. The likelihood ratio test for a simple hypothesis on the coexplosive
vectors is analyzed. The method is illustrated using data from the extreme
Yugoslavian hyperinflation of the 1990s.
