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Critical values for an F-test for cointegration in a multivariate model

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  • Athina Kanioura
  • Paul Turner

Abstract

Critical values for a test for cointegration are generated based on the joint significance of the levels terms in an error-correction equation. It is shown that the appropriate critical values are higher than those derived from the standard F-distribution. The power properties of this test are compared with those of the Engle-Granger (Econometrica, 55, 251-76, 1987) test and Kremers et al.'s (Oxford Bulletin of Economics and Statistics, 54(3), 325-48, 1992) t-test based on the t-statistic from an error-correction equation. The F-test has higher power than the Engle-Granger test but lower power than the t-form of the error-correction test. However, the F-form of the test has the advantage that its distribution is independent of the parameters of the problem being considered. Finally, a test is considered for cointegration between UK and US interest rates. It is shown that the F-test rejects the null of no cointegration between these variables although the Engle-Granger test fails to do so.

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  • Athina Kanioura & Paul Turner, 2005. "Critical values for an F-test for cointegration in a multivariate model," Applied Economics, Taylor & Francis Journals, vol. 37(3), pages 265-270.
    • Handle: RePEc:taf:applec:v:37:y:2005:i:3:p:265-270
    DOI: 10.1080/00036840412331315051
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    References listed on IDEAS

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    1. Neil R. Ericsson & James G. MacKinnon, 2002. "Distributions of error correction tests for cointegration," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 285-318, June.
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    6. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-348, August.
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