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Spurious correlation under fractional integration in output series

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  • Dalkir, Mehmet

Abstract

This article identifies caveats of using the correlation coefficient between two fractionally integrated time series as a measure of association between them, and compares various procedures for removing the long-range dependence component in the output series of the G7.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4Y88D6M-2/2/8674bcf7229637c3ee8c6cfedabfe8b0
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 107 (2010)
Issue (Month): 2 (May)
Pages: 165-168

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Handle: RePEc:eee:ecolet:v:107:y:2010:i:2:p:165-168

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: Fractional integration Output correlations Stochastic systems;

References

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  1. Robin L. Lumsdaine & Eswar S. Prasad, 2003. "Identifying the Common Component of International Economic Fluctuations: A New Approach," Economic Journal, Royal Economic Society, vol. 113(484), pages 101-127, January.
  2. Wen-Jen Tsay, 2007. "Using Difference-Based Methods for Inference in Regression with Fractionally Integrated Processes," Journal of Time Series Analysis, Wiley Blackwell, vol. 28(6), pages 827-843, November.
  3. Michael D. Bordo & Thomas Helbling, 2003. "Have National Business Cycles Become More Synchronized?," NBER Working Papers 10130, National Bureau of Economic Research, Inc.
  4. Imbs, Jean, 2003. "Trade, Finance, Specialization and Synchronization," CEPR Discussion Papers 3779, C.E.P.R. Discussion Papers.
  5. Baxter, Marianne & Kouparitsas, Michael A., 2005. "Determinants of business cycle comovement: a robust analysis," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 113-157, January.
  6. Katsumi Shimotsu, 2002. "Exact Local Whittle Estimation of Fractional Integration with Unknown Mean and Time Trend," Economics Discussion Papers 543, University of Essex, Department of Economics.
  7. David K. Backus & Patrick J. Kehoe, 1991. "International evidence on the historical properties of business cycles," Staff Report 145, Federal Reserve Bank of Minneapolis.
  8. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December.
  9. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  10. M. Ayhan Kose & Eswar Prasad & Marco Terrones, 2003. "How Does Globalization Affect the Synchronization of Business Cycles?," IMF Working Papers 03/27, International Monetary Fund.
  11. Brian M. Doyle & Jon Faust, 2005. "Breaks in the Variability and Comovement of G-7 Economic Growth," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 721-740, November.
  12. Chung, Ching-Fan, 2002. "Sample Means, Sample Autocovariances, And Linear Regression Of Stationary Multivariate Long Memory Processes," Econometric Theory, Cambridge University Press, vol. 18(01), pages 51-78, February.
  13. Tsay, Wen-Jen & Chung, Ching-Fan, 2000. "The spurious regression of fractionally integrated processes," Journal of Econometrics, Elsevier, vol. 96(1), pages 155-182, May.
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