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ECM tests for cointegration in a single equation framework

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  • Banerjee, Anindya
  • Dolado, Juan José
  • Mestre, Ricardo

Abstract

This paper proposes a new test for cointegration In a single-equation framework where the regressors are weakly exogenous for the parameters of interest. The test is denoted as ECM test and is based upon the OLS coefficient of the lagged dependent variable in an autoregressive-distributed lag model augmented with leads of the regressors. The limit distributions of the standardised coefficient and t-ratio versions of the ECM tests are obtained and critical values are provided. These limit distributions do not depend upon nuisance parameters but they depend on the number of regressors. Finally, we compare their power properties with those of other cointegration tests available in the literature and find under which circumstances the ECM tests have a better performance.

Suggested Citation

  • Banerjee, Anindya & Dolado, Juan José & Mestre, Ricardo, 1997. "ECM tests for cointegration in a single equation framework," DES - Working Papers. Statistics and Econometrics. WS 10607, Universidad Carlos III de Madrid. Departamento de Estadística.
    • Handle: RePEc:cte:wsrepe:10607
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    Cited by:

    1. Arranz, Miguel A. & Escribano, Álvaro, 1998. "Detrending procedures and cointegration testing: ECM tests under structural breaks," DES - Working Papers. Statistics and Econometrics. WS 4551, Universidad Carlos III de Madrid. Departamento de Estadística.
    2. Hondroyiannis, George & Papapetrou, Evangelia, 1998. "Temporal causality and the inflation-productivity relationship: Evidence from eight low inflation OECD countries," International Review of Economics & Finance, Elsevier, vol. 7(1), pages 117-135.
    3. Pradeep Agrawal, 2001. "The relation between savings and growth: cointegration and causality evidence from Asia," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 499-513.
    4. Charalambos Pattichis, 1999. "Price and income elasticities of disaggregated import demand: results from UECMs and an application," Applied Economics, Taylor & Francis Journals, vol. 31(9), pages 1061-1071.

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