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The Analysis of Nonstationary Time Series Using Regression, Correlation and Cointegration with an Application to Annual Mean Temperature and Sea Level

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  • Søren Johansen

    (Department of Economics, University of Copenhagen)

Abstract

There are simple well-known conditions for the validity of regression and correlation as statistical tools. We analyse by examples the effect of nonstationarity on inference using these methods and compare them to model based inference. Finally we analyse some data on annual mean temperature and sea level, by applying the cointegrated vector autoregressive model, which explicitly takes into account the nonstationarity of the variables.

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File URL: http://www.econ.ku.dk/english/research/publications/wp/dp_2010/1027.pdf/
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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 10-27.

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Length: 26 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:kud:kuiedp:1027

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Related research

Keywords: regression correlation cointegration; model based inference; likelihood inference; annual mean temperature; sea level;

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  1. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  2. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  3. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December.
  4. Peter C.B. Phillips, 1988. "Optimal Inference in Cointegrated Systems," Cowles Foundation Discussion Papers 866R, Cowles Foundation for Research in Economics, Yale University, revised Aug 1989.
  5. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  6. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  7. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
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