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On the effects of aggregating cointegrated variables over time

Author

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  • Müller, Christian

Abstract

It has long been recognized that aggregating time series introduces correlation between consecutive values of the aggregated observations (see Working (1960)). This paper investigates the effect of aggregation on the relation between variables assuming that the data generating process involves two integrated variables linked by a specific error correction mechanism (cointegration). It will be shown that aggregation does not distort the cointegration relation while some other features of the data generating process will change considerably. Cointegration tests become invalid in a single equation framework but system cointegration analysis seems to be robust against various aggregation strategies.

Suggested Citation

  • Müller, Christian, 2002. "On the effects of aggregating cointegrated variables over time," SFB 373 Discussion Papers 2002,9, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:20029
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    More about this item

    Keywords

    cointegration; aggregation; time series;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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