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Low-Frequency Robust Cointegration Testing

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  • Ulrich Müller
  • Mark W. Watson

Abstract

Standard inference in cointegrating models is fragile because it relies on an assumption of an I(1) model for the common stochastic trends, which may not accurately describe the data's persistence. This paper discusses efficient low-frequency inference about cointegrating vectors that is robust to this potential misspecification. A simple test motivated by the analysis in Wright (2000) is developed and shown to be approximately optimal in the case of a single cointegrating vector.

Suggested Citation

  • Ulrich Müller & Mark W. Watson, 2009. "Low-Frequency Robust Cointegration Testing," NBER Working Papers 15292, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15292
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    Cited by:

    1. Hwang, Jungbin & Sun, Yixiao, 2016. "Simple, Robust, and Accurate F and t Tests in Cointegrated Systems," University of California at San Diego, Economics Working Paper Series qt82k1x4rd, Department of Economics, UC San Diego.
    2. Castelnuovo, Efrem, 2010. "Tracking U.S. inflation expectations with domestic and global indicators," Journal of International Money and Finance, Elsevier, vol. 29(7), pages 1340-1356, November.
    3. Moreira, Humberto Ataíde & Moreira, Marcelo J., 2013. "Contributions to the Theory of Optimal Tests," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 747, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    4. repec:rsr:journl:v:65:y:2017:i:3:p:17-34 is not listed on IDEAS
    5. Khalaf, Lynda & Urga, Giovanni, 2014. "Identification robust inference in cointegrating regressions," Journal of Econometrics, Elsevier, vol. 182(2), pages 385-396.

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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