| Description |
1 online resource (19 pages) : illustrations |
| Series |
IMF working paper ; WP/07/141 |
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IMF working paper ; WP/07/141.
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| Contents |
I. Introduction; II. Testing for Cointegration Using Johansen's Methodology; III. Monte Carlo Study; A. Setup; B. Results; 1. Spurious Rejection Frequency for Bivariate System; 2. Spurious Rejection Frequency for Trivariate System; IV. An Empirical Illustration; Tables; 1. Results from Augmented Dickey-Fuller Test; Figures; 3. Data; 2. Results from Cointegration Test; 3. Results from Hypothesis Tests on the Cointegrating Vector; V. Conclusion; Appendix; References |
| Summary |
We investigate the properties of Johansen's (1988, 1991) maximum eigenvalue and trace tests for cointegration under the empirically relevant situation of near-integrated variables. Using Monte Carlo techniques, we show that in a system with near-integrated variables, the probability of reaching an erroneous conclusion regarding the cointegrating rank of the system is generally substantially higher than the nominal size. The risk of concluding that completely unrelated series are cointegrated is therefore non-negligible. The spurious rejection rate can be reduced by performing additional tests of restrictions on the cointegrating vector(s), although it is still substantially larger than the nominal size |
| Bibliography |
Includes bibliographical references (pages 17-19) |
| Notes |
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212 MiAaHDL |
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digitized 2010 HathiTrust Digital Library committed to preserve pda MiAaHDL |
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Print version record |
| Subject |
Cointegration -- Econometric models
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Autoregression (Statistics)
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Autoregression (Statistics)
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| Form |
Electronic book
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| Author |
Österholm, Pär, author.
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International Monetary Fund. Western Hemisphere Department.
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| ISBN |
1283515326 |
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9781283515320 |
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