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A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration

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  • Shin, Yongcheol

Abstract

This paper proposes a residual-based test of the null of cointegration using a structural single equation model. It is shown that the limiting distribution of the test statistic for cointegration can be made free of nuisance parameters when the cointegrating relation is efficiently estimated. The limiting distributions are given in terms of a mixture of a Brownian bridge and vector Brownian motion. It is also shown that this test is consistent. Critical values are given for standard, demeaned, and detrended cases. Combining results from our test for cointegration with results from the Phillips-Ouliaris test for no cointegration, we find that there is evidence of cointegration between real consumption and real disposable income over the postwar period.

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  • Shin, Yongcheol, 1994. "A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration," Econometric Theory, Cambridge University Press, vol. 10(01), pages 91-115, March.
  • Handle: RePEc:cup:etheor:v:10:y:1994:i:01:p:91-115_00
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    4. Heckman, James J. & Singer, Burton, 1984. "Econometric duration analysis," Journal of Econometrics, Elsevier, pages 63-132.
    5. Pakes, Ariel S, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," Econometrica, Econometric Society, pages 755-784.
    6. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, pages 1661-1676.
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