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Tests for the Null Hypothesis of Cointegration: A Monte Carlo Comparison


  • Vasco Gabriel


The aim of this paper is to compare the relative performance of several tests for the null hypothesis of cointegration, in terms of size and power in finite samples. This is carried out using Monte Carlo simulations for a range of plausible data-generating processes. We also analyze the impact on size and power of choosing different procedures to estimate the long run variance of the errors. We found that the parametrically adjusted test of McCabe et al. (1997) is the most well-balanced test, displaying good power and relatively few size distortions.

Suggested Citation

  • Vasco Gabriel, 2003. "Tests for the Null Hypothesis of Cointegration: A Monte Carlo Comparison," Econometric Reviews, Taylor & Francis Journals, vol. 22(4), pages 411-435.
  • Handle: RePEc:taf:emetrv:v:22:y:2003:i:4:p:411-435 DOI: 10.1081/ETC-120025897

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    References listed on IDEAS

    1. Park, Joon Y, 1992. "Canonical Cointegrating Regressions," Econometrica, Econometric Society, vol. 60(1), pages 119-143, January.
    2. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 99-125.
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    6. Markku Lanne & Pentti Saikkonen, 2003. "Reducing size distortions of parametric stationarity tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 24(4), pages 423-439, July.
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    10. Charemza, Wojciech W. & Syczewska, Ewa M., 1998. "Joint application of the Dickey-Fuller and KPSS tests," Economics Letters, Elsevier, vol. 61(1), pages 17-21, October.
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    18. Leybourne, S J & McCabe, B P M, 1994. "A Consistent Test for a Unit Root," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 157-166, April.
    19. Saikkonen, Pentti, 1991. "Asymptotically Efficient Estimation of Cointegration Regressions," Econometric Theory, Cambridge University Press, vol. 7(01), pages 1-21, March.
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    21. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-193, January.
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    23. Xiao, Zhijie, 1999. "A residual based test for the null hypothesis of cointegration," Economics Letters, Elsevier, vol. 64(2), pages 133-141, August.
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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Gabriel, Vasco J., 2003. "Cointegration and the joint confirmation hypothesis," Economics Letters, Elsevier, vol. 78(1), pages 17-25, January.
    2. Vasco J. Gabriel & Martin Sola & Zacharias Psaradakis, 2002. "Residual-based tests for cointegration and multiple regime shifts," NIPE Working Papers 7/2002, NIPE - Universidade do Minho.

    More about this item


    Cointegration; Tests; Monte Carlo;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes


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