Is the Spurious Regression Problem Spurious?
So-called "spurious regression" relationships between random-walk (or strongly autoregressive) variables are generally accompanied by clear signs of severe autocorrelation in their residuals. A conscientious researcher would therefore not end an investigation with such a result, but would likely re-estimate with an autocorrelation correction. Simulations show, for several typical cases, that the test-rejection statistics for the re-estimated relationships are very close to the true values, so do not yield results of the spurious type.
|Date of creation:||Jan 2010|
|Publication status:||published as McCallum, Bennett T., 2010. "Is the spurious regression problem spurious?," Economics Letters, Elsevier, vol. 107(3), pages 321-323, June.|
|Note:||EFG ME TWP|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Clive Granger & Namwon Hyung & Yongil Jeon, 2001.
"Spurious regressions with stationary series,"
Taylor & Francis Journals, vol. 33(7), pages 899-904.
- Granger, Clive W.J. & Hyung, Namwon & Jeon, Yongil, 1998. "Spurious Regressions with Stationary Series," University of California at San Diego, Economics Working Paper Series qt7r3353t8, Department of Economics, UC San Diego.
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- Bennett T. McCallum, 1993. "Unit Roots in Macroeconomic Time Series: Some Critical Issues," NBER Working Papers 4368, National Bureau of Economic Research, Inc.
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