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Small Sample Properties of Canonical Cointegrating Regressions

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  • Han, Hsiang-Ling

Abstract

Monte Carlo simulations are performed to examine small sample properties of Canonical Cointegrating Regressions (CCR). The first data generation process is designed to generate both cointegrated and non-cointegrated systems with normal disturbances. If the near-observational equivalence of the stationary and the integrated processes is not significant, both powers and empirical sizes of CCR tests are acceptable. The second data generation process is based on the error correction model. Cointegrated systems with various fat-tailed disturbances are generated and analyzed. The empirical sizes of CCR tests with student "t" disturbances and GARCH disturbances are found to be reasonable under certain restrictions The last data generation process is a generalized least squares (GLS) process that incorporates heteroskedasticity into the error correction model. Again, the empirical sizes of CCR tests are reasonable.

Suggested Citation

  • Han, Hsiang-Ling, 1996. "Small Sample Properties of Canonical Cointegrating Regressions," Empirical Economics, Springer, vol. 21(2), pages 235-253.
  • Handle: RePEc:spr:empeco:v:21:y:1996:i:2:p:235-53
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    Cited by:

    1. Masao Ogaki & Carmen M. Reinhart, 1998. "Measuring Intertemporal Substitution: The Role of Durable Goods," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1078-1098, October.
    2. Elena Márquez de la Cruz, 2005. "La elasticidad de sustitución intertemporal y el consumo duradero: un análisis para el caso español," Investigaciones Economicas, Fundación SEPI, vol. 29(3), pages 455-481, September.
    3. Han, Hsiang-Ling & Ogaki, Masao, 1997. "Consumption, income and cointegration," International Review of Economics & Finance, Elsevier, vol. 6(2), pages 107-117.
    4. Han, Hsiang-Ling, 2000. "Choice of currency basket weights and its implications on trade balance," International Review of Economics & Finance, Elsevier, vol. 9(4), pages 323-350, October.
    5. repec:eee:renene:v:118:y:2018:i:c:p:437-451 is not listed on IDEAS
    6. Masakatsu Okubo, 2011. "The Intertemporal Elasticity of Substitution: An Analysis Based on Japanese Data," Economica, London School of Economics and Political Science, vol. 78(310), pages 367-390, April.
    7. Okubo, Masakatsu, 2002. "Long-Run Relationship between Consumption and Income in Japan: Tests of the Deterministic Cointegration Restriction," Journal of the Japanese and International Economies, Elsevier, vol. 16(2), pages 253-278, June.

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