The paper proposes a new model of fractional cointegration, and considers methods for testing the existence of cointegrating relationships using the parametric bootstrap. In these procedures, ARFIMA time series models fitted to the data, with resampled residuals, are used to simulate the null hypothesis of non-cointegration. The simulations are used to determine p-values for alternative test statistics, including the F goodness-of-fit statistic, the Durbin-Watson, and estimates of the residual d. The tests are applied to the hypothesis that UK government support, shown in previous work to be a nonstationary fractional process, is not explained by indicators of economic performance. The power properties of the tests are studied by simulations of artificial cointegrating relationships based on the sample data. The tests based solely on the regression residuals, which are shown to be inconsistent for nonstationary alternatives, perform poorly relative to the test based on the F statistic.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Related research
Keywords:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: