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The power of single equation tests for cointegration

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  • Steven Cook

Abstract

In recent research, Kanioura and Turner (2005) have proposed an F-test for cointegration based upon the joint significance of the level terms in an error correction model. In the present study, the analysis of this test is extended via comparison with the GLS-based cointegration test of Perron and Rodriguez (mimeo, 2001). The simulation evidence presented indicates that for the data generation process considered by Kanioura and Turner, the F-test possesses greater power than both the Engle-Granger and the GLS-based cointegration tests. An empirical examination of the relationship between UK non-durable consumers' expenditure and disposable income illustrates the findings of the simulation analysis, with the F-test alone able to reject the null of no cointegration between the series.

Suggested Citation

  • Steven Cook, 2006. "The power of single equation tests for cointegration," Applied Economics Letters, Taylor & Francis Journals, vol. 13(5), pages 265-267.
    • Handle: RePEc:taf:apeclt:v:13:y:2006:i:5:p:265-267
    DOI: 10.1080/13504850500398534
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    Cited by:

    1. Månsson, Kristofer & Shukur, Ghazi & Sjölander, Pär, 2012. "Testing for Panel Cointegration in an Error Correction Framework - with an Application to the Fisher Hypothesis," HUI Working Papers 72, HUI Research.
    2. Tang, Chor Foon, 2008. "A re-examination of the relationship between electricity consumption and economic growth in Malaysia," Energy Policy, Elsevier, vol. 36(8), pages 3067-3075, August.
    3. Tuck Cheong Tang, 2008. "Money demand function for Southeast Asian countries," Journal of Economic Studies, Emerald Group Publishing, vol. 34(6), pages 476-496, January.
    4. Tuck Cheong Tang, 2007. "Money demand function for Southeast Asian countries," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 34(6), pages 476-496, November.
    5. Abdulnasser Hatemi-J & Eduardo Roca, 2012. "A re-examination of the unbiased forward rate hypothesis in the presence of multiple unknown structural breaks," Applied Economics, Taylor & Francis Journals, vol. 44(11), pages 1443-1448, April.

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