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Testing for the 'Existence of a Long-run Relationship'

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Author Info
Pesaran, M. H.
Shin, Y.
Smith, R. J.

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Abstract

This paper develops a new approach to testing for the existence of a linear long-run relationship, when the orders of integration of the underlying regressors are not known with certainty. The test is the standard Wald or F statistic for testing the significance of the lagged levels of the variables in a first-difference regression. The asymptotic distributions of these statistics are non-standard under the null hypothesis that there exists no long-run relationship between the levels of the included variables. Two sets of asymptotic critical values are provided: one set assuming that all regressors are I(1), and another assuming they are all I(0). These provide a band covering all possible classifications of the regressors into I(0), I(1) or mutually cointegrated.

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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 9622.

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Date of creation: 1996
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Handle: RePEc:cam:camdae:9622

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Web page: http://www.econ.cam.ac.uk/index.htm

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This page was last updated on 2008-9-28.


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