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A cautionary note on cointegration testing

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  • Michael Sumner

Abstract

Inferences from the Johansen procedure regarding cointegration, and the magnitude, significance and even the sign of the estimated parameters of a familiar macroeconomic relation, are shown to be extremely sensitive to the treatment of its deterministic components and to the assumed lag structure. An unrestricted error-correction model yields unambiguous inferences and performs better in a range of tests.

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  • Michael Sumner, 2004. "A cautionary note on cointegration testing," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 275-278.
    • Handle: RePEc:taf:apeclt:v:11:y:2004:i:5:p:275-278
    DOI: 10.1080/1350485042000191728
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    References listed on IDEAS

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    1. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-692, December.
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    Cited by:

    1. 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, vol. 40(7), pages 885-895.

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