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Structural Spurious Regressions and A Hausman-type Cointegration Test

  • Chi-Young Choi

    (University of New Hampshire)

  • Ling Hu

    (Ohio State University)

  • Masao Ogaki

    (Ohio State University)

This paper proposes two estimators based on asymptotic theory to estimate structural parameters with spurious regressions involving unit-root nonstationary variables. This approach motivates a Hausman-type test for the null hypothesis of cointegration for dynamic Ordinary Least Squares estimation using one of our estimators for spurious regressions. We apply our estimation and testing methods to four applications: (i) long-run money demand in the U.S.; (ii) long-run implications of the consumption-leisure choice; (iii) output convergence among industrial and developing countries; (iv) Purchasing Power Parity for traded and non-traded goods.

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File URL: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_517.pdf
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Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 517.

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Length: 38 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:roc:rocher:517
Contact details of provider: Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

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  1. Davidson, James & de Jong, Robert M., 2000. "The Functional Central Limit Theorem And Weak Convergence To Stochastic Integrals Ii," Econometric Theory, Cambridge University Press, vol. 16(05), pages 643-666, October.
  2. Campbell, John & Perron, Pierre, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," Scholarly Articles 3374863, Harvard University Department of Economics.
  3. Peter C. B. Phillips, 1998. "New Tools for Understanding Spurious Regressions," Econometrica, Econometric Society, vol. 66(6), pages 1299-1326, November.
  4. Peter C.B. Phillips, 1987. "Partially Identified Econometric Models," Cowles Foundation Discussion Papers 845R, Cowles Foundation for Research in Economics, Yale University, revised Aug 1988.
  5. Engel, C., 1996. "Accounting for U.S. Real Exchange Rate Changes," Discussion Papers in Economics at the University of Washington 96-02, Department of Economics at the University of Washington.
  6. Nelson, Charles R & Kang, Heejoon, 1981. "Spurious Periodicity in Inappropriately Detrended Time Series," Econometrica, Econometric Society, vol. 49(3), pages 741-51, May.
  7. Eichenbaum, Martin S & Hansen, Lars Peter & Singleton, Kenneth J, 1988. "A Time Series Analysis of Representative Agent Models of Consumption and Leisure Choice under Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 51-78, February.
  8. Stockman, Alan C & Tesar, Linda L, 1995. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," American Economic Review, American Economic Association, vol. 85(1), pages 168-85, March.
  9. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-50, July.
  10. Durlauf, Steven N & Phillips, Peter C B, 1988. "Trends versus Random Walks in Time Series Analysis," Econometrica, Econometric Society, vol. 56(6), pages 1333-54, November.
  11. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December.
  12. Ogaki, M. & Park, Y.Y., 1989. "A Cointegration Approach To Estimating Preference Parameters," RCER Working Papers 209, University of Rochester - Center for Economic Research (RCER).
  13. Donald W.K. Andrews & Christopher J. Monahan, 1990. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Cowles Foundation Discussion Papers 942, Cowles Foundation for Research in Economics, Yale University.
  14. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  15. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
  16. Shin, Yongcheol, 1994. "A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration," Econometric Theory, Cambridge University Press, vol. 10(01), pages 91-115, March.
  17. Peter C.B. Phillips, 1996. "Spurious Regression Unmasked," Cowles Foundation Discussion Papers 1135, Cowles Foundation for Research in Economics, Yale University.
  18. Arthur Lewbel & Serena Ng, 2000. "Demand Systems With Nonstationary Prices," Boston College Working Papers in Economics 441, Boston College Department of Economics, revised 07 Jun 2002.
  19. Phillips, Peter C.B. & Hodgson, Douglas J., 1994. "Spurious Regression and Generalized Least Squares," Econometric Theory, Cambridge University Press, vol. 10(05), pages 967-968, December.
  20. Masao Ogaki & Chi-Young Choi, 2001. "The Gauss-Markov Theorem and Spurious Regressions," Working Papers 01-13, Ohio State University, Department of Economics.
  21. Peter C.B. Phillips & Sam Ouliaris, 1987. "Asymptotic Properties of Residual Based Tests for Cointegration," Cowles Foundation Discussion Papers 847R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1988.
  22. Donggyu Sul & Peter C.B. Phillips & Choi, Chi-Young, 2003. "Prewhitening Bias in HAC Estimation," Cowles Foundation Discussion Papers 1436, Cowles Foundation for Research in Economics, Yale University.
  23. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
  24. Cooley, Thomas F & Ogaki, Masao, 1996. "A Time Series Analysis of Real Wages, Consumption, and Asset Returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(2), pages 119-34, March-Apr.
  25. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  26. repec:cup:etheor:v:10:y:1994:i:1:p:95-115 is not listed on IDEAS
  27. Kakkar, Vikas & Ogaki, Masao, 1999. "Real exchange rates and nontradables: A relative price approach," Journal of Empirical Finance, Elsevier, vol. 6(2), pages 193-215, April.
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