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On The Size And Power Of System Tests For Cointegration

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  • Ronald Bewley
  • Minxian Yang

Abstract

System tests for cointegration proposed by Stock and Watson (1988), Johansen (1988), and Bewley and Yang (1995) are compared using Monte Carlo experiments that include overspecification of the lag length and data-generating processes with moving average disturbances. Both AIC and SIC are used to select the lag length of the approximating vector autoregressions. The three tests considered are found to have very different characteristics, and each dominates in some portion of the parameter space. © 1998 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog

Suggested Citation

  • Ronald Bewley & Minxian Yang, 1998. "On The Size And Power Of System Tests For Cointegration," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 675-679, November.
  • Handle: RePEc:tpr:restat:v:80:y:1998:i:4:p:675-679
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Österholm, Pär, 2003. "Testing for Cointegration in Misspecified Systems –A Monte Carlo Study of Size Distortions," Working Paper Series 2003:21, Uppsala University, Department of Economics.
    2. Elena Pesavento, 2007. "Residuals-based tests for the null of no-cointegration: an Analytical comparison," Journal of Time Series Analysis, Wiley Blackwell, vol. 28(1), pages 111-137, January.
    3. Par Osterholm, 2004. "Size properties of cointegration tests in misspecified systems," Applied Economics Letters, Taylor & Francis Journals, vol. 11(15), pages 919-924.
    4. Lukasz Lach & Henryk Gurgul, 2010. "International trade and economic growth in the Polish economy," Operations Research and Decisions, Wroclaw University of Technology, Institute of Organization and Management, vol. 3, pages 5-29.
    5. Wagner, Martin, 1999. "VAR Cointegration in VARMA Models," Economics Series 65, Institute for Advanced Studies.
    6. Jordan Shan & Fiona Sun, 1998. "On the export-led growth hypothesis for the little dragons: An empirical reinvestigation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, pages 353-371.
    7. Carlos Enrique Carrasco Gutiérrez & Reinaldo Castro Souza & Osmani Teixeira de Carvalho Guillén, 2007. "Selection of Optimal Lag Length in Cointegrated VAR Models with Weak Form of Common Cyclical Features," Working Papers Series 139, Central Bank of Brazil, Research Department.
    8. Pesavento, Elena, 2004. "Analytical evaluation of the power of tests for the absence of cointegration," Journal of Econometrics, Elsevier, vol. 122(2), pages 349-384, October.
    9. Hagedorn, Marcus & Kaul, Ashok & Mennel, Tim, 2010. "An adverse selection model of optimal unemployment insurance," Journal of Economic Dynamics and Control, Elsevier, pages 490-502.
    10. Bewley, Ronald, 2002. "Forecast accuracy, coefficient bias and Bayesian vector autoregressions," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 59(1), pages 163-169.
    11. Nasim Shah Shirazi & Turkhan Ali Abdul Manap, 2004. "Exports and Economic Growth Nexus: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 563-581.

    More about this item

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other

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