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Tests for the Null Hypothesis of Cointegration: A Monte Carlo Comparison

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  • Vasco Gabriel

Abstract

The aim of this paper is to compare the relative performance of several tests for the null hypothesis of cointegration, in terms of size and power in finite samples. This is carried out using Monte Carlo simulations for a range of plausible data-generating processes. We also analyze the impact on size and power of choosing different procedures to estimate the long run variance of the errors. We found that the parametrically adjusted test of McCabe et al. (1997) is the most well-balanced test, displaying good power and relatively few size distortions.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Econometric Reviews.

Volume (Year): 22 (2003)
Issue (Month): 4 ()
Pages: 411-435

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Handle: RePEc:taf:emetrv:v:22:y:2003:i:4:p:411-435

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Keywords: Cointegration; Tests; Monte Carlo;

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Cited by:
  1. Gabriel, Vasco J., 2003. "Cointegration and the joint confirmation hypothesis," Economics Letters, Elsevier, vol. 78(1), pages 17-25, January.
  2. Vasco J. Gabriel & Martin Sola & Zacharias Psaradakis, 2002. "Residual-based tests for cointegration and multiple regime shifts," NIPE Working Papers 7/2002, NIPE - Universidade do Minho.

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