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Structural Spurious Regressions and A Hausman-type Cointegration Test

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Author Info

  • Chi-Young Choi

    (University of New Hampshire)

  • Ling Hu

    (Ohio State University)

  • Masao Ogaki

    (Ohio State University)

Abstract

This paper proposes two estimators based on asymptotic theory to estimate structural parameters with spurious regressions involving unit-root nonstationary variables. This approach motivates a Hausman-type test for the null hypothesis of cointegration for dynamic Ordinary Least Squares estimation using one of our estimators for spurious regressions. We apply our estimation and testing methods to four applications: (i) long-run money demand in the U.S.; (ii) long-run implications of the consumption-leisure choice; (iii) output convergence among industrial and developing countries; (iv) Purchasing Power Parity for traded and non-traded goods.

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File URL: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_517.pdf
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Bibliographic Info

Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 517.

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Length: 38 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:roc:rocher:517

Contact details of provider:
Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

Related research

Keywords: Spurious regression; GLS correction method; Dynamic regression; Test for cointegration.;

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References

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  1. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, Econometric Society, vol. 61(4), pages 783-820, July.
  2. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1251-71, November.
  3. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, Econometric Society, vol. 69(6), pages 1519-1554, November.
  4. Ogaki, M. & Park, Y.Y., 1989. "A Cointegration Approach To Estimating Preference Parameters," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 209, University of Rochester - Center for Economic Research (RCER).
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  7. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, Econometric Society, vol. 58(1), pages 165-93, January.
  8. Charles Engel, 1995. "Accounting for U.S. Real Exchange Rate Changes," NBER Working Papers 5394, National Bureau of Economic Research, Inc.
  9. Martin S. Eichenbaum & Lars Peter Hansen & Kenneth J. Singleton, 1986. "A Time Series Analysis of Representative Agent Models of Consumption andLeisure Choice Under Uncertainty," NBER Working Papers 1981, National Bureau of Economic Research, Inc.
  10. Peter C.B. Phillips, 1996. "Spurious Regression Unmasked," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1135, Cowles Foundation for Research in Economics, Yale University.
  11. Masao Ogaki & Chi-Young Choi, 2001. "The Gauss-Markov Theorem and Spurious Regressions," Working Papers, Ohio State University, Department of Economics 01-13, Ohio State University, Department of Economics.
  12. Durlauf, Steven N & Phillips, Peter C B, 1988. "Trends versus Random Walks in Time Series Analysis," Econometrica, Econometric Society, Econometric Society, vol. 56(6), pages 1333-54, November.
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  14. Cooley, Thomas F & Ogaki, Masao, 1996. "A Time Series Analysis of Real Wages, Consumption, and Asset Returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 11(2), pages 119-34, March-Apr.
  15. Peter C. B. Phillips, 1998. "New Tools for Understanding Spurious Regressions," Econometrica, Econometric Society, Econometric Society, vol. 66(6), pages 1299-1326, November.
  16. Phillips, Peter C.B. & Hodgson, Douglas J., 1994. "Spurious Regression and Generalized Least Squares," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 10(05), pages 967-968, December.
  17. Shin, Yongcheol, 1994. "A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 10(01), pages 91-115, March.
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  21. de Jong, Robert M. & Davidson, James, 2000. "The Functional Central Limit Theorem And Weak Convergence To Stochastic Integrals I," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 16(05), pages 621-642, October.
  22. Alan C. Stockman & Linda L. Tesar, 1991. "Tastes and technology in a two-country model of the business cycle: explaining international co-movements," Working Paper, Federal Reserve Bank of Cleveland 9019, Federal Reserve Bank of Cleveland.
  23. Kakkar, Vikas & Ogaki, Masao, 1999. "Real exchange rates and nontradables: A relative price approach," Journal of Empirical Finance, Elsevier, Elsevier, vol. 6(2), pages 193-215, April.
  24. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, Econometric Society, vol. 41(4), pages 733-50, July.
  25. repec:cup:etheor:v:10:y:1994:i:1:p:95-115 is not listed on IDEAS
  26. Peter C.B. Phillips & Chi-Young Choi & Donggyu Sul, 2004. "Prewhitening Bias in HAC Estimation," Yale School of Management Working Papers, Yale School of Management ysm426, Yale School of Management.
  27. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, Elsevier, vol. 2(2), pages 111-120, July.
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Citations

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Cited by:
  1. Diego Bastourre & Jorge Carrera & Javier Ibarlucia, 2010. "Commodity Prices: Structural Factors, Financial Markets and Non-Linear Dynamics," BCRA Paper Series, Central Bank of Argentina, Economic Research Department, Central Bank of Argentina, Economic Research Department, number 06 edited by Jorge Carrera, June.
  2. Niko Gobbin & Glenn Rayp, 2008. "Different ways of looking at old issues: a time-series approach to inequality and growth," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 40(7), pages 885-895.

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