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Measuring correlations of integrated but not cointegrated variables: A semiparametric approach

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  • Sun, Yiguo
  • Hsiao, Cheng
  • Li, Qi

Abstract

Many macroeconomic and financial variables are integrated of order one (or I(1)) processes and are correlated with each other but not necessarily cointegrated. In this paper, we propose to use a semiparametric varying coefficient approach to model/capture such correlations. We propose two consistent estimators to study the dependence relationship among some integrated but not cointegrated time series variables. Simulations are used to examine the finite sample performances of the proposed estimators.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 164 (2011)
Issue (Month): 2 (October)
Pages: 252-267

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Handle: RePEc:eee:econom:v:164:y:2011:i:2:p:252-267

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

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Keywords: Integrated time series Non-cointegration Semiparametric varying coefficient models;

References

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Cited by:
  1. Gan, Li & Hsiao, Cheng & Xu, Shu, 2014. "Model specification test with correlated but not cointegrated variables," Journal of Econometrics, Elsevier, vol. 178(P1), pages 80-85.
  2. Gu, Jingping & Liang, Zhongwen, 2014. "Testing cointegration relationship in a semiparametric varying coefficient model," Journal of Econometrics, Elsevier, vol. 178(P1), pages 57-70.

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