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Low-Frequency Robust Cointegration Testing

  • Ulrich Müller
  • Mark W. Watson

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15292.

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Date of creation: Aug 2009
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Publication status: published as Müller, Ulrich K. & Watson, Mark W., 2013. "Low-frequency robust cointegration testing," Journal of Econometrics, Elsevier, vol. 174(2), pages 66-81.
Handle: RePEc:nbr:nberwo:15292
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